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2015: Capital market driven by reforms, innovative technology, others

By Peter Egwuatu & Nkiruka Nnorom

The regulators in the Nigerian capital market in the year 2015 focused on reforming the sector to rekindle investor confidence, which was eroded during the financial global meltdown in 2008/2009. The Securities and Exchange Commission, SEC and Nigerian Stock Exchange, NSE have been the  major driver of this reform through regulations and enforcement , strengthening market institutions, promoting corporate governance, supporting innovative technology and prioritising cooperation both domestically and internationally.
The reform to some extent has improved market liquidity, introduced alternative trading platforms and created an enabling environment supportive of new products like e-Dividend, trading alert      Market Making, Exchange Traded Funds (ETFs), Real Estate Investment Trusts (REITs) and SUKUK.
However, notwithstanding some of the remarkable progress the Nigerian Capital has made, the market is yet to get to the level where it should be and to get there a lot remains to be done.  This has informed SEC’s decisions to leverage the cooperation of market operators to develop a strategic document for the first time in the history of the Nigerian capital market called “ Capital Market Master Plan”. 10 Year Master Plan
The report regarded as a 10 year Capital Market Master Plan articulates the race the market will embark upon starting from 2015 to 2025.

The report covers three major areas. These are enhancing overall capital market growth, Non Interest Financial Products and Capital Market literacy. Minimum Capital Base During the period under review, SEC mandated operators in the market to shore up their minimum capital or face revocation of their operational licence. About 437 firms were published by the commission to have provisionally met the minimum capital base.
Operators’ Sanctions

The commission had during the year sanctioned several operators that had breached market rules and regulations.  Also, 84 firms’ operational licences were revoked by the commission for failing to meet registration requirements, amongst others.
National Investor Protection Fund
The SEC commenced the revival of the National Investor Protection Fund as part of effort to boost investor confidence in the year under review .Following the inauguration of the National Investor Protection Fund (NIPF) on 26th November, 2015, the verification committee of the NIPF concluded a rigorous verification of investors’ claims against Mega Asset Managers Limited and subsequently recommended approval of appropriate compensation to the affected investors.
e-Dividend Mandate Managment System
There was also the launch of e-Dividend Mandate Management System for Registrars and banks.  Further to the launching of the e-Dividend Mandate Management System (e-DMMS) Portal on 29th July 2015, the commission subsequently trained its staff in readiness for its enforcement.
During the year 2015, the secondary bond market was enhanced with the listing of FGN bond in the FMDQ  and NSE trading platform.
The commission during the year under review had urged the Debt Management Office, DMO to consider issuing a sovereign SUKUK on behalf of the Federal government to boost the Non Interest capital market segment. The SEC had stated that this will provide a benchmark for other issuers of Sukuk like state governments.
Premium Board
Meanwhile, in line with its commitment of promoting Africa’s biggest companies the NSE within the year launched a new listing platform –  Premium Board and its associated Premium Board Index – featuring companies that meet the Exchange’s most stringent listing criteria of capitalization, governance and liquidity. Three companies – Dangote Cement Plc, FBN Holdings Plc, and Zenith International Bank Plc, met the criteria and therefore qualified for the pilot phase.
Also, during the year, the NSE in conjunction with MSCI signed partnership to develop and market a co-branded family of indexes for the equity market (MSCI Inc.  formerly MSCI Barra, is a US-based provider of equity, fixed income, and hedge fund stock market indexes, and equity portfolio analysis tools. It publishes the MSCI BRIC, MSCI World and MSCI EAFE Indexes.)
Investor Protection Fund
Following the inauguration of the Board of Trustees of Investors Protection Fund (IPF) the previous year and the mandate to commence payment of claimants that that have genuine claims, the Board compensated first set of beneficiaries totalling 158 claimants to the tune of N42.23 million for pecuniary losses suffered by them as a result of wrong doing by certain dealing member firms of the Exchange.
Demutualisation
Furthermore, the NSE announced the appointment of the consortium of Rand Merchant Bank (RMB) and Chapel Hill Denham (CHD) as financial advisers on the proposed demutualisation of the Exchange.   At the twilight of the year, the NSE in partnership with the Central Securities Clearing System (CSCS) commenced Post-trade Allocation Service to operators. The post-trade allocation services will enable brokers to buy securities en-block thereby saving time of buying into separate accounts.

In line with its educational intervention aimed at addressing the challenges experienced by schools in Nigeria through facility and process improvement, teachers’ empowerment and students’ intellectual advancement, the NSE launched Adopt-a-School initiative.
Brobers Oversight & Supervision
The Exchange also launched Broker Oversight & Supervision System (X-BOSS). The system, which is the first of its kind in the West African capital market, seeks to redefine the compliance and regulation experience between The Exchange and its Dealing Members.
Bond Market
The FMDQ OTC Securities Exchange, that promotes transaction in fixed income securities in Nigerian, listed N30 billion Fidelity Bank Bonds, N8 billion Nigeria Mortgage Refinance Company (NMRC) Bonds, N26.0 billion FCMB Financing SPV Bonds on its platform and also quoted the Nigerian Breweries Commercial Paper and N8.15 billion Wema Bank Plc’s Commercial Paper. In all, there is no doubt that with full implementation of the Capital Market Master Plan, the market will eventually emerge as one of the world’s deepest,  most liquid and largest in the world.

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