By Peter Egwuatu & Michael Eboh
The proposed integration of regional capital markets by the African Securities Exchanges Association (ASEA) has been endorsed by operators and stakeholders in the Nigerian capital market.
The operators and stakeholders who spoke to Vanguard said the move is in the right direction as African markets will be opened up for global participation.
They said that the integration of regional capital markets will bring a lot of benefits to the region, such as increase in depth of the market and easy access to funds, amongst others.
Vanguard gathered that the authorities of the Nigerian and Ghanaian capital markets last week held a strategic meeting toward the harmonisation and integration of capital markets in the West African sub_region.
Director General/Chief Executive Officer of the NSE, Professor (Mrs.) Ndi Okereke Onyiuke disclosed after the close door meeting between the NSE and Ghana Stock Exchange (GSE) that the integration of the capital markets was in furtherance of the Memorandum of Understanding (MOU) signed by stock exchanges in West Africa last year, after the ASEA meeting held in Abuja.
She disclosed that plans are at advanced stage to harmonise the rules, laws and trading procedures of capital markets in the region, adding that parties to the agreement are considering setting up an integrated trading platform for shares and other capital market instruments in the region.
She said, â€œIn Abuja, last year, the GSE, Securities and Exchange Commission (SEC), NSE, Ghana Securities and Exchange Commission, Bourse Regionales des Valeurs Mobilieres (BRVM) and other capital market operators in West Africa , signed an MOU to integrate capital markets in the region.
According to her â€œThe meeting held is in furtherance of that agreement. Very soon, there will be a meeting of Chief Executives of all capital markets operators in the region, after which stockbrokers and other market operators will join the processes, and a key office established having representatives of regulators and operators.
â€œWe are looking at harmonising all the rules, laws and processes of all the capital markets in the regions. We hope to set up a fully integrated trading platform.â€
Speaking in the same vein, Chief Executive Officer , Ghana Securities and Exchange Commission, Dr. Nii Sowa expressed satisfaction that operators and regulators of capital markets across the region are working towards an integrated capital market. He noted that an integrated capital market will address the challenges confronting the economic development of the region, as it will ease off liquidity and provide easy access to funds for developmental purposes.
He, however, called for proper ethical conduct among operators in the region, urging them to strive towards education of the investing public on the gains of investing in the capital market.
Meanwhile, in his contribution on the issue of regional capital market integration, Mr.Tunde Adeyemi, Managing Director, DHTL Capital Limited, said, â€œThe capital market integration is really not a new event, it is a process that has been long overdue, if not for the myopic nature of our regulators and operators in Nigeria over the years.
In terms of market capitalisation, listed companies, daily trading transactions in the few recognised capital markets in West Africa, Nigeria has about 81.05 per cent as at December, 2008 both in performance andÂ Â with a Compound Average Growth Rate (CAGR) of about 43 per cent in the last five years compared to the highest country in the region of a CAGR of 4.11 per cent.
â€œAt least we see the case of New York Stock Exchange (NYSE) and EURONEXT model, though not really the same, but in line with the concepts, it is working perfectly. The sub region need to be integrated to develop economically. At least we see the pace set by Nigerian Banks in the last three years; banks like Intercontinental Bank, Oceanic Bank and Zenith Bank open the gateway and needs to be commended.
â€œThe notable advantages of the integration are that it will assists all the economies within the region to experience growth quickly and have access to a finance and investment model that can maintain sustainability;
â€œIt will results in effective portfolio diversifications, a way to give investors opportunity to diversify to good fundamental based portfolio frontier in the region. The economic risks and cross border risk is very low compared to investing in Asia, Europe and US;
â€œThe integration will open the gateway for the region to experience economic growth and address collectively the policy bane of the region, while fostering great opportunities for leading financial managers to invest greatly in the continents and help to tap into the 92.67 per cent untapped opportunities in this region.
â€œAlso it helps in the regulation harmony and uniformity, with support and socio_economic development.
However, some of the militating factors that needs to be addressed, though can be well managed includes, currency differentials and state of the economy, language barriers and the political system and government structures among othersâ€.
Some shareholders of quoted companies who spoke to Vanguard on the issue emphasised that the integration of the capital market operation in the African region will help ease constraints on infrastructure financing, as well as developing debt markets in Africa as ASEA has earlierÂ endorsed plans to support the issuing of local currency bonds on the continent.
The shareholders opined that local currency bond markets are becoming a popular alternative funding source for several emerging and developing countries as a way to rid themselves of the challenges of using aid related finances for development purposes.
Regulators and industry players in the capital market reached the agreement of supporting the issuing of fixed income securities during their 13th annual ASEA conference held in Abuja Nigeria early last year.
The meeting, Vanguard gathered discussed the centrality of issuing fixed income securities on the capital markets to support the infrastructure deficits in Africa . Stock Exchanges will work with all concerned parties to support the development of infrastructure for example electricity, water, telecommunications, energy and transportation.
It would be recalled that ASEA officials said in a joint press statement issued after the conference that the development is a welcome initiative as African countries work towards riding themselves of over dependence on donor funds to finance development projects on the continent. Over the last half century, more than $1 trillion has been given as aid to developing countries.
â€œ Raising such financing locally saves the country from over reliance on foreign aid which is very expensive when it comes to servicing it, allows local capital markets to grow from within and avoid economic shocks from exchange rate fluctuations, aÂ shareholder noted.
Adding his contribution of benefits of integration of regional markets, Mr. David Adonri, General Manager, Lambeth Trust and Investment Limited said, â€œIntegration of capital markets in ECOWAS is one of the measures agreed upon towards economic integration of the sub_region. The aggregation is aimed at deepening the Capital Markets by increasing the number of securities available for trading in each market without cross border restrictions.
This will enhance liquidity and increase volume of trade. The enlarged Market will increase the success rate of Public Offerings, as offerings can open simultaneously in every market within the sub_region. Ecobank Transnational Inc. which is currently listed and simultaneously traded in three markets within the sub_region is an example of integration.