Capital Market to Propel Economic Growth, Collaboration, Innovation in Nigeria

1. The Capital Market Committee (CMC) convened its third meeting of the year, honored by the esteemed presence of key stakeholders, including the Chairman of the Senate Committee on Capital Market, Distinguished Senator Osita B. Izunaso, and his deputy, Distinguished Senator Peter N. Jiya as well as the Chairman of the House Committee on Capital Market and Institutions, Right Honourable Solomon T. Bob, and his deputy, Right Honourable Dr. Muktar Umar Zakari along with other distinguished guests.

2. The meeting featured an overview of key developments in the capital market. CMC members listened to updates from heads of various market infrastructures and CMC Technical Committees, as well as observer groups.

3. In his brief address, Right Honourable Solomon T. Bob, commended the Commission and the entire capital market on the 2023 3rd Quarter Capital Market Committee (CMC) meeting. He expressed the readiness of his committee to contribute towards facilitating the development of an ecosystem that would ensure efficient access to capital formation through consultation, cooperation, and information exchange. He acknowledged the existence of external economic forces impacting market expansion and highlighted the National Assembly’s role in protecting investors. He welcomed enhanced coordination for market innovation and stated his readiness to help strengthen the relationship between the market and the NASS. The Chairman recognized the opportunities offered by the emerging derivatives market and anticipated valuable insights from this and future CMC meetings for legislative frameworks supporting a thriving capital market.

4. In his address, Distinguished Senator Osita B. Izunaso, underscored the senate committee’s steadfast commitment to fostering a robust market environment. He outlined legislative initiatives, including the repeal of the Investments and Securities Act (ISA) 2007, which has already passed 1st and 2nd Reading at the House of Representatives and 1st Reading at the Senate. Senator Izunaso pledged to help expedite the process, aiming for submission to the President for assent by Q1 2024. He commended the government’s interest in the capital market, signified by the appointment of key figures from the market to influential positions. The Senator urged the Commission to enhance public awareness of the capital market’s benefits, expressing optimism that the envisioned one trillion-dollar economy could be realized, with the help of collaborative efforts and productive actions in the capital market.

5. In his opening remarks, the Chairman of the CMC, and Director General of the Securities & Exchange Commission, acknowledged the presence of the distinguished senators and honourable members of the House of Representatives, saying it was a testament to their unwavering commitment to the advancement and prosperity of the Nigerian capital market.

6. The Chairman provided a brief assessment of the global economy, acknowledging its resilience amid challenges such as the pandemic, ongoing geopolitical tensions, and economic uncertainties around the world. The Chairman highlighted the disparity in economic performance across countries and regions, lower global growth projections, and the impact of interest rate hikes on economic activity.

7. On the domestic front, he highlighted key economic indicators, including Nigeria’s headline inflation rate, GDP growth rate, and market performance. He noted concerns around the recent reclassifications of Nigerian securities indices by FTSE-Russell and MSCI, attributing these to the present foreign exchange liquidity challenges, and its effects on investor confidence.

8. The Chairman reported that, in spite of lower foreign portfolio investment inflows, the Nigerian stock market had reached a positive milestone with the All-Share Index reaching an all-time high, crossing the 70,000-point mark. This, he said, reflected a more than 30 percent increase this year.

9. Addressing the challenges posed by high-interest rates on government treasury securities, the Chairman stressed the need for strategic measures to attract more investments into the capital market.

10. The Chairman’s remarks provided updates on new issuances, mergers and acquisitions, and regulatory measures, including directives on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance. He also underscored the Commission’s efforts in digitization, market modernization, HR restructuring, and collaboration with other stakeholders, domestic and foreign.

11. The Chairman expressed optimism about unlocking the full potential of the capital market, aligning it with the Renewed Hope Agenda of the President and Commander in-chief of the armed forces of the Federal Republic of Nigeria, His Excellency Chief Ahmed Bola Tinubu

12. Members received updates from CMC Technical Committees, as well as CEOs of Exchanges and Market Infrastructures.

13. Daisey Ekineh, Chairperson of the Technical Committee on the Commodities Trading Ecosystem, informed the CMC about ongoing engagement with the Standards Organization of Nigeria (SON) to secure approval of certain standards and the adoption of additional commodity standards sanctioned by the African Organisation for Standardisation (ARSO). She highlighted other initiatives by the Technical Committee, with a particular focus on introducing commodity derivatives. Ms. Ekineh also highlighted other ongoing engagements, including efforts to work with the National Insurance Commission (NAICOM) to further de-risk the ecosystem by introducing insurance products that suit the needs of the commodities producers and traders.

14. The E-Dividend Mandate Technical Committee presented an update on the collaborative project with ICMR and NIBSS to enhance the e-Dividend portal. The Committee Chair, Mrs Hafsat Rufai, reaffirmed its commitment to the project’s timely completion, aiming for a launch on or before November 30, 2023. NIBSS showcased the revamped portal to the e-Dividend Mandate Committee on Wednesday, November 15, 2023, demonstrating its dedication to delivering the project in line with the revised project work plan. The Committee noted that 18 out of 19 Registrars had submitted updated data on Un-Mandated Accounts for upload. The Portal progress updates would be provided at the next CMC meeting.

15. The Financial Literacy Technical Committee (FLTC) informed the CMC that it convened a Regional Investor Awareness Conference at the University of Ilorin, Kwara State, on November 9, 2023. The conference brought together representatives from nine universities in Kwara State. The Committee also apprised members of the ongoing work to include capital market studies in curricula of schools in Nigeria. It called on stakeholders who were yet to complete their contributions to the project to do so.

16. The Non-Interest Technical Committee Chairperson, Mrs. Hajara Adeola, provided a comprehensive overview of key developments since the previous meeting, which include; the successful issuance of the 6th FGN Sukuk by the Debt Management Office (DMO) with a remarkable subscription level of 435%; floatation of additional Shariah-compliant Fixed-Income Fund; and hosting of a capacity-building workshop for stakeholders in non-interest segment by SEC. The Committee also informed members of finalized plans to engage with various stakeholders to explore the development of Shariah-compliant liquidity instruments for the commodities market, and creation of short-term Sukuk with the DMO. Mrs. Adeola acknowledged the challenges faced in 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.

17. The Nigeria Exchange (NGX) Limited informed members that globally, equities markets had fairly rebounded due to reallocation of capital by investors following the slowdown in rates hikes by the US Fed and other central banks, and higher risk appetites. The NGX chief attributed the +36.67% performance of the NGX ASI to attractive yields of some stocks, improved sentiments among domestic retail investors, inability of T-bills and other fixed income instruments to provide positive real return, recovering corporate earnings, as well as fiscal and monetary policy shifts. He observed that market participation had remained heavily skewed to domestic investors.

18. The NASD gave updates to the Committee, noting that the OTC Securities Exchange had seen positive performance, with the NASD Securities Index (NSI) increasing by 17.1% year-to-date (YTD) to reach 831.09 points by the end of October 2023. The Market Cap. rose by 20.81% YTD, driven in part by the admission of new securities. In a year-on-year (YoY) comparison, there was a significant 40.67% increase in the number of deals, and trading activities saw increases of 16.62% and 29.58% in volume and value, respectively.

19. The FMDQ told the Committee that on Tuesday, September 12, 2023, FMDQ Group Plc introduced the recently launched 10-year National Housing Strategy Blueprint (NHSB) to the Federal Ministry of Housing and Urban Development. All stages of the FMDQ Derivatives Market Development Project had been successfully executed, and regulatory approvals had been secured for additional FMDQ Exchange-Traded Derivatives (ETD) products.

20. CSCS reported a 23% growth in the average daily clearing and settlement value to around N10.7 billion in Q3 ’23, although it dropped to N5.3 billion in Oct ’23. On a year-on-year basis, as at October 2023 there was a 60% growth, driven by bullish sentiments and solid performance of key equities in their half-year results. Monthly investor KYC saw 8,572 Accounts updated in Q3 2023, a 31% increase compared to Q2 2023, attributed to positive market sentiments. The CSCS emphasized the need for a coordinated awareness campaign on updating KYC, advocating for market-wide collaboration and a comprehensive campaign across various media channels. He called for the co-operation of the Registrars to share investors’ bio-data details on dividend claims with the Depository, expecting this to increase the number of accounts with updated records. Additionally, he stressed the importance of developing additional pathways for KYC data updates beyond trading.

21. The NCX informed the committee of the appointment of an MD/CEO, Mr. Anthony Atuche, and termination of the Transition Management Team, as well as rebranding of the NCX to an institution with a private sector outlook, its public sector ownership notwithstanding.

22. NG Clearing informed the committee of the value proposition for central clearing as well as its product development drive and that it was strategically prioritizing the onboarding of new Trading Members.

23. The Nigerian Capital Market Institute (NCMI) informed members that the Board of the institute has approved the introduction of seven (7) new specialized programs, namely:
    1. School of Investment Banking
    2. School of Compliance

• School of Islamic Finance

1. School of Investment Management
2. School of Corporate Governance
3. School of Commodities Market

• School of Fintech

These programs are designed to enhance understanding of the Nigerian Capital Market’s operations, workings, and technicalities.

24. In conclusion, the meeting underscored the Capital Market Committee’s dedication to propelling Nigeria’s economic growth, fostering collaboration, and embracing innovation to build a greater future for our nation. It once again offered the capital market community an opportunity to rededicate its efforts towards further deepening of the market to serve as a veritable tool for infrastructure financing in the country.

Thank you and good morning.

Lamido A. Yuguda, CFA, FCA, FCIB

Director General

Securities and Exchange Commission, Nigeria