BY PETER EGWUATU

The implications of a 10 year master plan for the Nigerian capital is quite clear as it hopes to transform the market, make it competitive and contribute its quota of developing the nation through funds mobilization.
Capital market master plan is good for nations that are still developing and aspiring to move to emerging market segment.  The Asian countries have adopted this plan and have moved from developing to emerging market with high growth.

The Asian countries, which are the pairs of Nigeria in the past 30 years, have moved faster than Nigeria with respect to their capital market growth and development. Capital markets are a critical driver of economic growth, channeling private savings toward promising public and private investment opportunities.

The ASEAN countries have benefited tremendously in the adoption of capital market master plan. For instance, in macroeconomic growth, individual ASEAN nations have experienced steady economic expansion, driven by increasing intra-Asian trade and infrastructure investment.

For capital markets product diversity, ASEAN capital markets have matured across the product range: – Equities: The combined market cap of ASEAN exchanges (as of end-2012) reached $2.3 US Dollars, creating the 5th largest equity pool in the Asia-Pacific region. On fixed income: local currency fixed income markets have also expanded significantly in recent years, creating Asia-Pacific’s 4th largest market by issued amount outstanding, behind Japan, China and Korea.

On Over the Counter (OTC) Derivatives: Excluding Singapore due to its role as a regional financial trading hub, ASEAN onshore OTC derivative markets are still at a nascent stage. However, daily traded volumes have increased over three-fold over the past decade across Indonesia, Malaysia, Philippines and Thailand – laying the base for future development.
On participants: The range of participants in ASEAN markets has expanded significantly over the past decade across issuers, intermediaries and investors:

On established domestic markets (Malaysia, Thailand): The domestic markets of Malaysia and Thailand maintains a broad base of local issuers and investors, with domestic institutions achieving scale. Malaysia maintains regional leadership in Sharia-compliant products and a robust fixed income market; however both countries lack significant OTC derivative activity. Foreign investors have considerable access; however some restrictions remain through listed company.

Malaysia had in the past discovered the need to have a capital market master plan and consequently in 2001 launched its first 10-year capital market master plan.  In 2011, it launched the second capital market master plan and all these have helped the country to wax stronger in building infrastructure, industries etc. The same for Thailand, the Government launched Thailand’s first capital market master plan in early 2002 in an effort to develop and diversify the country’s sources of funds.

The plan outlines broad initiatives that are considered the main policy framework guiding Thai capital market development. These initiatives include promoting good governance, enlarging the investor base, increasing the quantity and variety of financial instruments, enhancing infrastructure, and reforming the supervisory system.  The second phase of the plan was released in February 2006 covering the period 2006–2010. It was proposed by the Federation of Thai Capital Market Organizations (FeTCO) and related government bodies to the Thai Ministry of Finance.

According to the authorities of the Malaysia, the lessons from past financial crises are that rapid growth is not sustainable unless it is underpinned by well-grounded ethical beliefs and high levels of integrity.  The Malaysia  capital market master plan 2 provides equal emphasis to achieving governance objectives to ensure Malaysia’s capital market continues to be well-regulated with participants strengthening their capabilities and professional standards and exercising a strong sense of responsibility towards the interests of their customers.

So the plan by the Nigeria’s Securities and Exchange Commission, SEC to have a master plan for the market this year in the right direction.  Last year the SEC inaugurated three committees with the mandate to draft a 10-year master plan aimed at developing a long term strategic plans for a sustainable growth and development of the Nigerian capital market.

The committees includes: The 10-year master plan committee, non-interest products committee and literacy committee. Former Chairman of Accenture Nigeria, Mr. Adedotun Sulaiman heads the master plan committee; Mrs. Hajara Fola Adeola chairs the non-interest committee while President, Chartered Institute of Stockbrokers (CIS), Mr Ariyo Olushekun chairs the literacy committee.

The reports from the committees are expected to produce a blue print for the nation’s capital market after being fine-tuned by the commission. If this happens this year, it will be the first time the nation’s capital market will have a blue print after 54 years of Nigeria’s independence.  This will be a landmark achievement, even as ongoing reforms in the market have started bearing fruits since the aftermath of the global meltdown in 2008.

It should be noted that three committees inaugurated by SEC are meant to conduct a holistic review of similar emerging markets and develop blueprints to structure the market for global competitiveness.
Director-General, Securities and Exchange Commission (SEC), Ms Arunma Oteh, had said while inaugurating the committee that the key areas to look into will include investor protection and education, professionalism, product innovation and expansion of the role of the capital market in economic development.