DG, PenCom, Mr. Mohammad Ahmad
Several initiatives by the management of the Nigerian Stock Exchange (NSE) aimed at repositioning the exchange and make the stock market more attractive, would increase the patronage of the market by pension funds administrators(PFAs), the Director-General of National Pension Commission (PenCom), Mr. Mohammad Ahmad, has said.
The pension assets in the country stood at N1.5 trillion as at June 2012 and PFAs that manage these assets, are required by law to invest maximum of 25 per cent in the stock market.
However, most of the PFAs do not hit this benchmark given the poor state of the capital market in recent times.
But speaking to newsmen last week in Lagos, Ahmad, said the stock market would witness more patronage from PFAs considering the initiatives by the current management of the exchange to deepen the market and strengthen corporate governance.
“PFAs have not drawn down their investments in the equities market. The 25 per cent limit still exists. They only limited their level of patronage because of issue of corporate governance both from the perspective of operators and listed companies. But with the initiatives of current management of the exchange, we believe the issues of corporate governance is being addressed and this will definitely affect the patronage going forward,” Ahmad said.
The PenCom boss, who spoke on the side line of a conference on market making, security lending and short selling organised by the NSE, said with the commencement of market making in the Nigerian equities market, the issue of liquidity would likely to be addressed.
Apart from the introduction of market making, the NSE had last year re-classified the various sectors to ease investment decision-making and increase investment knowledge and enhance strategic portfolio construction.
Besides, the reporting level has been improved upon as companies are now made to provide adequate information and data while filling in their quarter financial results and other corporate actions.
The latest development is the market making, which the Chief Executive Officer of the exchange, Mr. Oscar Onyema, said would enhance the liquidity and depth of the second largest market in sub-Saharan Africa.
Head, Transformation and Change, NSE, Mr. Olumide Lala, had explained that market makers would play a central role in the provision of two-way quotes (comprising buy and sell prices) for the securities that they are making markets on.
“Leveraging the securities lending process, Market Makers will be able to borrow securities in order to settle ‘buy order imbalances’ from customers. A ‘hybrid’ market, allowing both market makers to provide two way quotes and licensed broker/dealers of exchange to submit orders as is currently done, will be operated from the commencement date of this key initiative,” he said.