By Cynthia Alo
Managing Director and Chief Executive Officer of Heritage Bank Plc, Ifie Sekibo, has said that market formation framework is key to optimally exploit Nigeria’s precious metal and solid minerals endowments.
A statement signed by the Acting Group Head, Corporate Communications, Ozena Utulu, noted that this was disclosed during a webinar organised by the Securities and Exchange Commission (SEC) in collaboration with the Federal Ministry of Mines and Steel Development with the theme, “Financing the Solid Minerals Sector throug the Capital Market and the Critical Role of Commodity Exchanges.”
Sekibo explained that a fully established market formation process would lead to having a Corporation as an integrated solid mineral institution like the Nigerian National Petroleum Corporation, NNPC, which allows the collateralisation of assets those banks can rely on for alternative funding options.
According to him, this will guarantee other creative ways of raising funds for financing commercial activities relating to solid minerals and viable projects along its value chain.
Sekibo who was represented by the bank’s Divisional Head, Strategy and Business Solutions, Olusegun Akanji, argued that for the sector to be viable, it requires lots of converged government interventions because for any development focused sector to kick-off around the world, it needs government intervention to lay the foundation for the private sector and funders to step-in and pool their resources.
“Once, we can collateralise these assets, whether they are under the ground or being determined, you use different instruments to bring liquidity into them. Then investors will follow up once we have established there is enough they can explore.” the MD stated.
He further suggested that finance sector regulators need to expand its Prudential Guidelines to accommodate the instruments such that precious metal backed or solid minerals backed assets could qualify as part of the computation of liquidity ratios.
“Once banks start injecting their resources, customers would certainly follow that trend. You can start arranging for sophisticated solutions like bonds, bullion backed assets and pension notes. Again, banks will have to be poised to hold the funding that comes from this sector; that way, they can open new transactional frontiers either locally or internationally.
“At the base of this, are the issues of pricing and integrity of the market. Once banks play in that sector and we have a government institution like the NNPC type to hold all these documentations, it would be very easy to establish price discovery on an ongoing basis,” Sekibo explained.