•Innovative products needed to sustain GDP growth, SEC tells market operators
Eromosele Abiodun and Ndubuisi Francis in Abuja
The Vice President, Prof. Yemi Osinbajo yesterday called on the Central Bank of Nigeria (CBN) and other key government agencies to work with the Nigerian Exchange Limited (NGX) to ensure that excessive risk premium in the capital market was abated.
Why decrying the year-to-date performance of the stock market, in advancing measures to reverse the trend, he said foreign investors needed to be sure that Nigeria’s foreign exchange (forex) mechanism and other regulations would enable them channel resources in and take their resources out.
Osinbajo stated this while delivering his keynote address at the NGX Capital Market Conference with the theme: “The Future Ready Capital Market: Innovating for Nigeria’s Sustainable Recovery,” held in Abuja.
According to him, “The NGX in 2020, was the highest performing exchange with a return of 50 per cent from the All Share Index (ASI) when compared with 98 other exchanges tracked globally by Bloomberg, yet in 2021, the exchange has experienced a significant withdrawal of foreign participation leading to a meagre performance of 7.65 per cent.
“To correct this and usher in the return of foreign, domestic and institutional participation, I must say that it is clear that government and other government agencies and regulators in our financial system such as the CBN, Securities and Exchange Commission (SEC) and the National Pension Commission (PenCom) among other key stakeholders realise that we must work with the NGX to ensure that the excessive risk premium within the market is abated and foreign investors are ensured of our foreign exchange mechanism and other regulations that will enable them to channel resources in and take their resources out is put right.”
However, he said the federal government had shown its commitment and was committed to working with relevant stakeholders to achieve this objective.
“And I believe it is evident as we restate our commitment to working with NGX to develop the capital market especially with the signing of the singing of the demutualisation bill into law in 2018, so the point for reassuring the business environment for local and foreign investments is our medium term national development plan which was officially approved by the Federal Executive Council (FEC) contains a robust policy plan agenda aimed at achieving fast and sustainable growth.
“The objective of the plan includes the establishment of a strong foundation for a diversified economy, investing in critical infrastructure, enabling human capital development and improving security.
“The economy is expected to grow from about three per cent this year, rising to about 6.3 per cent in 2025. The key of course is in the implementation and we must ensure that we implement this plan,” he said.
He added that the government was improving the macroeconomic environment as well as the regulatory regime, adding that this would help the country realise the huge opportunities in the capital market.
“This issues are crucial, government policies and actions are important and there is no way of overemphasising that,” he added.
To get the economy working, he said the trade groups and chambers of commerce and other business associations must play key and active roles.
The government, he added, was already leveraging on the existing digital platform not just to attract new generation of investors, but to get access to data to enhance investment decisions.
“We should also attract tech companies present and future tech companies to the market as a revival options for raising capital and at the same time giving investors the opportunity to benefit from the phenomenal growth of this company We must commend the Securities and Exchange Commission for a steady regulatory oversight, “he said.
Sustainability reporting, he added, was mandatory, saying it had been able to attract institutional investment and was becoming a norm.
“We must also leverage on our experience on issuing the sukuk bonds, the sukuk bonds have deepened our capital markets and the proceeds have been beneficial to us as a government in improving our sources of finance for infrastructure budgets. “There are many more rooms to bring international investors and also the African Continental Free Trade Agreement (AfCFTA) offers new exciting opportunities and formation of long term capital.
“The NGX must see itself as a critical player even in the negotiation on the AfCFTA, so this is the time to come into play along with government negotiators,” the vice president said.
In his presentation, the Director General of SEC, Mr. Lamido Yuguda, urged capital market operators to continuously produce innovative products, platforms and processes in order to sustain current economic recovery trajectory.
Yuguda noted that to sustain this trajectory, overcome some of the negative impact of the COVID-19 pandemic and achieve the objectives of the developmental plans of the government, the capital market needed to continuously produce innovative products, platforms and processes.
In a goodwill message at the conference, Yuguda stated that innovation plays a critical role in the development of any capital market as it increases the markets’ chances of reacting to changes, and enables the discovery of new opportunities.
He noted that technological innovations had been identified as one of the factors that could enhance the efficiency and transparency of capital markets around the world and enable financial intermediation, making it easier for investors and market professionals to identify opportunities and conduct their businesses in a timely and cost efficient manner.
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.”
According to him, the International Organisation 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.
Yuguda added that SEC had put mechanisms in place to understand relevant innovations, build required capacity and subsequently deploy strategies to address them, adding that this process was ongoing and that the Commission was deeply committed to this new phase and face of the capital market.
He noted that the SEC had 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.
