Nigeria is in a better position to advance its capital market locally and globally through technology and young people.
This was the view expressed by Vice President Yemi Osinbajo, SAN, in his keynote speech on Tuesday in Abuja at first Capital Market Conference of the Nigerian Exchange (NGX) Group.
Speaking on the NGX Conference theme: “The Future Ready Capital Market: Innovating for Nigeria’s Sustainable Recovery,” the Vice President stated that, “every smart investor must be looking now at how to be a part of the miracle of the Nigerian Unicorns, the about five or six indigenous Nigerian companies (driven by young Nigerians) that became billion-dollar enterprises since 2015 in the midst of two recessions.”
The Vice President, who emphasized the digital transformation of the markets, highlighted the many opportunities this move would provide for the capital markets, which includes bringing in more young investors.
He advised the adoption of technology “to bring in a new crop of young investors, many of who use their smartphones primarily for engaging with commerce and banking activities today. And you have commendably begun the journey to the digital transformation of the market, following the highly successful example of the banks and, of course, the telcos.”
The VP added, “today, the huge retail outlets already created by the telcos with well over a hundred million subscribers, the wide reach of banks, especially with the numerous financial inclusion initiatives, make this probably the most auspicious moment for digitizing the capital market to bring in the millions of new young retail investors.”
The VP also noted the efforts of the NGX Technology Board to attract tech companies he referred to as ‘the present and future tech unicorns’ to the market as a viable option for raising capital. Prof. Osinbajo stated that technology will also give “more investors the opportunity to benefit from the phenomenal growth of these companies.”
However, he observed that “we must work gingerly to ensure that where policy may be involved, we enhance and not encumber the ability of these companies to raise capital quickly and efficiently. This, of course, will call for mirroring successful global best practices.”
Prof. Osinbajo, who noted that this was probably the most exciting time in the history of capital markets in Nigeria, added that the African Continental Free Trade Agreement (AfCFTA) also offered exciting new prospects for cross-border listings, activity, and the formation of long-term capital.
“Your brand campaign, ‘the Stock of which Africa is made of’ which was well commended by Mr. President is not only imaginative but bold and focused. I think of importance now is that the NGX must work with government AfCFTA negotiators, especially as the process progresses to setting the rules in the service sector,” he submitted.
Urging the NGX to see itself as a critical player in the AfCFTA negotiations, the VP added that “we are at a point where we are looking at negotiating Service Rules, we have looked at Rules of Origin already, so this is the time to come into play to get the best deals possible from all our partners all across Africa.”
He further stated that with the successful completion of its demutualization process, “which fully commercializes the functions of the exchange as a corporate entity and importantly, separates the regulatory function to prevent conflicts of interest, the NGX can now focus on its core function of exploring new opportunities, leveraging strategic partnerships and transacting business to deliver profit.”
According to the VP, while its primary market not only has the largest concentration of young people, the NGX is “now positioned to reverse the trend of declining IPOs in capital markets worldwide, with offerings that are more business-oriented and less constrained exchange such as you have now.
“We also now have a greater room for redefining the exchange for international competitiveness. This is especially so as is currently being done, reviewing the governance framework and, of course, the profit orientation of the exchange means that investors can look forward to seeing more fast-growing companies listed on the exchange.”
On how the Federal Government is supporting the capital markets to become globally competitive, the Vice President stated government’s efforts in the AfCFTA negotiations, as well as policies to improve the economic environment, including the recent passage of the Petroleum Industry Act 2021, and incorporation of the Nigeria National Petroleum Corporation (NNPC).
He added that “next year, the Federal Government will further strengthen the frameworks for concessions and public-private partnerships (PPPs) especially as they relate to infrastructure.”
Prof. Osinbajo also pointed out that the Government-backed N15trillion Infrastructure Fund being set up in partnership with the private sector will further help to bridge infrastructure gaps.
The VP observed that despite a significant withdrawal of foreign investors and domestic institutional participation in 2021, “the NGX in 2020 was the highest performing exchange with a return of 50% on the All-Share Index, when compared with 98 other exchanges tracked globally by Bloomberg.”
Prof. Osinbajo added that one of the ways to fast-track the return of foreign and domestic institutional participation is through effective collaboration between government agencies, regulators, and the Exchange.
Reiterating the Federal Government’s commitment to a partnership with the NGX, the VP observed that, “we need the capital markets for the economy and the capital markets need a thriving economy for its own growth.
A statement issued by ‘Laolu Akande
Senior Special Assistant to the President on Media & Publicity
Office of the Vice President
quoted the VP as saying
“This government has shown its commitment to working with the NGX, in many ways, including the President’s signing of the demutualization bill into law in 2018. So, the point of a reassuring business environment for foreign and local investors is not lost on us as a government.
“I believe that all government agencies, and regulators in our financial system such as the Central Bank of Nigeria, the SEC, PENCOM among other key stakeholders, realize that we must work with the NGX to ensure that the excessive risk premium within the market is abated and foreign investors are reassured of a transparent foreign exchange mechanism and other regulations that will enable them to channel their resources in and take their resources out with the least possible constraint.”
On climate finance, capital markets, and the benefits for Nigeria, the VP said the Federal Government and the NGX have taken the initiative of issuing the first African Sovereign Green Bond and the first Climate Bonds Certified Sovereign bond.
“We became only the fourth nation in the world to issue one. The value of Nigeria’s green bonds market has now hit $136 million within three years with four issuances recorded since the debut issuance by the Federal Government in 2017. And it continues to grow,” he said.
Prof. Osinbajo further highlighted the Federal Government’s Medium-Term National Development Plan 2021-2025 and collaboration with the private sector in its implementation.
“The Plan envisages that the economy will grow from about 3% this year rising to 6.33% in 2025. The key, of course, is the implementation of the Plan, which is expected to be supported by a range of measures of fiscal, monetary, and trade measures,” according to the VP.
In his opening address, the Chairman, Nigerian Exchange Limited, Mr. A.B. Mahmoud, SAN, thanked the Vice President for honouring their invitation, while noting that the Conference is in line with the government’s economic growth plans.
The Conference also featured remarks by the Speaker of the House of Representatives, the Right Honourable Femi Gbajabiamila; Senator Ibikunle Amosun – who represented the Senate President, Ahmed Lawan; Conference chairman, and Chairman, BUA Group, Alhaji Abdul Samad Rabiu; and goodwill messages (via Zoom video) from His Royal Highness, Muhammadu Sanusi II; and the Director-General, Securities and Exchange Commission (SEC), Mr. Lamido Yuguda.
The event also had in attendance the Governor of Ekiti State and Chairman, Nigerian Governors’ Forum, Dr. Kayode Fayemi; Niger State Governor, Abubakar Bello; Edo State Governor, Godwin Obaseki; Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed; and the host of the Conference, the CEO, Nigerian Exchange Limited, Mr. Temi Popoola, among others.
In his goodwill message,Director General of the Securities and Exchange Commission, Mr. Lamido Yuguda said the capital market of every nation plays a strategic role, not only in allocating scarce resources, but in harnessing the huge investment opportunities in agriculture, infrastructure, oil and gas, natural resources as well as in other sectors of the economy.
He said, “Nigeria like most other countries in the world experienced weak growth in their economies as a result of the impact of the Covid-19 pandemic. The Nigerian economy is just recovering from the effect of the Covid-19 pandemic, with a GDP growth rate of 4.03% in the third quarter of 2021 from a contraction of 6.10% in the second quarter of 2020.
“To sustain this trajectory, overcome some of the negative impact of the pandemic and achieve the objectives of the developmental plans of the government, the capital market needs to continuously produce innovative products, platforms and processes. Innovation plays a critical role in the development of any capital market as it increases the markets’ chances of reacting to changes, and enables discovery of new opportunities”.
Yuguda disclosed that the International Organization for Securities Commission (IOSCO) acknowledges that the use of technological innovations by market operators could potentially create significant efficiencies and benefits for firms and investors, including increasing execution speed and reducing the cost of investment services.
“However, IOSCO also notes that this use may create or amplify certain risks, which could potentially have an impact on the efficiency of financial markets, resulting in consumer harm.
“As the apex body responsible for regulating and developing the Nigerian capital market, the SEC has strengthened market rules and regulations with the introduction of responsive rules and the amendment of existing ones to mitigate some of the risks posed by technological innovations.
“With a three-pronged objective to regulating innovations hinged on safety, market deepening, and solution to problems, our regulations, are enabling, accommodating and futuristic. They also ensure adherence to our core regulatory mandates of investor protection and market development”.
Furthermore, he stated that the SEC has put mechanisms in place to understand relevant innovations, build required capacity and subsequently deploy strategies to address them adding that this process is ongoing and the Commission is deeply committed to this new phase and face of the Capital Market.
Yuguda also said that the SEC has revamped its enforcement mechanism and enforced its zero tolerance against infractions in a bid to improve investors’ confidence in the market, and to optimally perform its investor protection mandate as evidenced in the Commission’s aggressive fight against unlawful investment schemes, which in recent times has plagued the financial markets.
“We have also committed resources to enhancing our processes through fortification of our ICT infrastructure in the areas of Registration, Returns Rendition and Analytics. Given that the advent of Financial Technology has changed how traditional capital market activities are being conducted, the SEC has embraced FinTech, and as such, has redefined its regulatory landscape to accommodate fintech related capital market activities.
“To this end, we have developed rules on crowdfunding, Robo-advisory and Digital Sub-broking. In addition, we have developed a ’Regulatory incubation framework, which will be implemented in due course.
“To align our market with the global focus on sustainable financing, the SEC released its guidelines to the market on sustainable financial principles to guide regulated entities on how to establish relevant standards and policies for their respective organizations” He stated.
The SEC DG stated that while these measures put in place by the Commission creates the required enabling environment for increased and improved capital market activities, there is a duty on all stakeholders to utilize these channels, which have been created by the Commission to spur major economic growth.
According to him, “The ultimate duty of stirring market activities is a collective one, which must be performed by all stakeholders in the Nigerian capital market. I therefore call on all stakeholders to complement the efforts of the SEC and stimulate activities within the already established framework to ensure that the Nigerian capital market improves its contribution to the nation’s GDP.
“On behalf of the Board, Management and Staff of the SEC, I reiterate our commitment to continue to provide the required support needed to actualize this industry wide goal. I believe that our collective efforts will immensely improve the fortunes of the market, and place us on the right track to reposition it as a world class capital market” he added.
