SEC wants focus on challenges impacting capital market performance

… Inflation, GDP growth of concern

Agwunobi Joy

To attract more investment into the Nigerian capital market, the Securities and Exchange Commission (SEC) has identified the need for strategic measures to address the challenges posed by high-interest rates on government treasury securities, as well as other key economic indicators, such as inflation and GDP growth,impacting the performance of the Nigerian capital market

Lamido Yuguda, the director general of the SEC and Chairman of the Capital Market Committee (CMC), spoke about these issues at the third meeting of the committee in 2023. He noted that recent changes to the classification of Nigerian securities by FTSE-Russell and MSCI have impacted the market, as have the effects of foreign exchange liquidity challenges on investor confidence. He acknowledged that these challenges have created an uncertain environment for investors, and emphasised the need for action to address them.

The CMC chairman also noted a positive development despite the challenges facing the market, highlighting that the All-Share Index had reached an all-time high, surpassing the 70,000-point mark. This reflects an increase of more than 30 percent in 2023, which indicates that there is still considerable potential for growth in the market.

In addition to providing updates on the state of the Nigerian capital market, the chairman spoke about other important issues related to the market, including new issuances, mergers and acquisitions, and AML/CFT compliance. He also emphasised the commission’s commitment to digitization, modernization, and collaboration with stakeholders.

Yuguda expressed confidence that the full potential of the Nigerian capital market can be unlocked, in alignment with the renewed hope agenda of President Tinubu.

The meeting also included updates from the various technical committees of the CMC, as well as from the CEOs of exchanges and market infrastructures. These updates provided important insights into the operations of the market and the progress being made in various areas.

Daisey Ekineh, chairperson of the technical committee on the commodities trading ecosystem, highlighted some of the work being done by the committee. She explained that the committee is working with the Standards Organisation of Nigeria (SON) to gain approval for specific standards and adopt additional commodity standards from the African Organisation for Standardisation. In addition, she outlined other initiatives that the committee is pursuing, including the introduction of commodity derivatives.

According to Hafsat Rufai, chair of the e-Dividend mandate technical committee, the committee is working with the Institute of Capital Market Registrars (ICMR) and the Nigeria Inter-Bank Settlement System (NIBSS) to enhance the e-Dividend portal. The project is scheduled to be completed by November 30, 2023, and the committee is committed to meeting this deadline.

The Financial Literacy Technical Committee reported on the regional investor awareness conference held at the University of Ilorin on November 9, 2023. The conference was attended by representatives from nine universities in the Kwara State and focused on raising awareness about the capital market and its benefits. The committee also highlighted its ongoing work to include capital market studies in the curricula of schools in Nigeria. It encouraged stakeholders who have not yet made contributions to the project to do so as soon as possible.

Hajara Adeola, the Chairperson of the Non-Interest Technical Committee, outlined a number of important developments in the non-interest sector since the last meeting. These include:

– The successful issuance of the 6th FGN Sukuk by the Debt Management Office, which received strong demand from investors, with a subscription level of 435%.

– The floatation of an additional Shariah-compliant Fixed-Income Fund, which is expected to provide additional investment opportunities for investors.

– A capacity-building workshop for stakeholders in the non-interest segment, organized by the Securities and Exchange Commission

The committee further informed members that plans were in place to engage with a range of stakeholders to explore the development of Shariah-compliant liquidity instruments for the commodities market, and to create short-term Sukuk in collaboration with the Debt Management Office.

Adeola acknowledged several challenges facing the non-interest market, including: lack of awareness on existence of the Non-Interest Pension Funds; absence of an established commodities market for non-interest instruments; limited pool of investment-grade potential corporate sukuk issuers within the domestic capital market; and the unavailability of a sukuk issuance calendar and short-term liquidity instruments.

The CMC meeting was also honored by the esteemed presence of key stakeholders, including Osita  Izunaso,the chairman of the senate committee on capital market, and his deputy, Peter Jiya as well as Solomon Bob the chairman of the house committee on capital market and institutions, and his deputy,Muktar Umar Zakari,along with other distinguished guests.

Solomon Bob expressed his appreciation for the efforts of the Securities and Exchange Commission and the capital market in organizing the 3rd Quarter Capital Market Committee meeting. He stated that his committee was committed to working collaboratively with other stakeholders to create an ecosystem that facilitates efficient access to capital.

Bob acknowledged the impact of external economic forces on the capital market and the role of the National Assembly in protecting investors. He also highlighted the importance of coordination and collaboration between the capital market and the National Assembly to drive innovation and create a more enabling environment for investors.