CEM REPORT, MARKET | The Nigerian capital market is poised for a significant leap forward with the Securities and Exchange Commission’s (SEC) announcement of its near-completion of a real-time market monitoring project.
This technological advancement, coupled with the establishment of a robust risk management framework, promises to enhance investor protection, market stability, and overall efficiency.
According to former SEC Director-General Lamido Yuguda, the IT project is over 75% complete. This initiative is designed to equip the SEC with the capability to detect market infractions in real-time, significantly improving the commission’s ability to enforce regulations and safeguard investors.
“The initiative would help to improve internal efficiency and reduce time-to-market,” Yuguda remarked at a virtual press briefing held in Lagos. This translates to faster and more effective responses to potential market manipulation or other fraudulent activities.
SEC Initiative to Boost Confidence
Further bolstering investor confidence is the implementation of a robust risk management and internal control framework for the National Investor Protection Fund (NIPF), which is expected to commence operations within the current quarter. This fund serves as a safety net for investors in the event of brokerage firm insolvency.
The SEC has also intensified its supervisory efforts, focusing on fund managers and conducting inspections to identify vulnerabilities and enhance the overall stability of the fund management industry. These efforts have resulted in the implementation of corrective measures designed to strengthen the sector.
Yuguda highlighted the commission’s support for the growth of the fund management industry in 2023, with approvals granted for new mutual funds (₦18.2 billion) and discretionary/non-discretionary investment products (₦17.6 billion). These figures demonstrate the increasing dynamism of the Nigerian capital market.
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Embracing Fintech with Caution
The SEC is committed to embracing the opportunities presented by FinTech innovations. However, Yuguda emphasized the importance of managing associated risks and establishing a regulatory framework for the digital asset space. This balanced approach ensures that the capital market can benefit from technological advancements while mitigating potential threats.
Demonstrating alignment with the Federal government’s infrastructure development goals, the SEC has approved five infrastructure fund shelf programs totalling a significant ₦1.5 trillion. This move represents a major step forward in mobilizing capital for critical infrastructure projects.
SEC on Bank Recapitalization
Yuguda commended the Central Bank of Nigeria’s (CBN) recent bank recapitalization policy and highlighted the lessons learned from previous exercises. The SEC will soon issue guidelines to facilitate an efficient capital-raising process for banks seeking to comply with the new requirements.
“SEC is collaborating with the Central Bank of Nigeria (CBN) and other relevant agencies to ensure a smooth process,” Yuguda stated. He expressed confidence in the capital market’s ability to provide the necessary funds for the bank recapitalization, citing recent instances of large companies successfully raising significant financing.
“Over the past few quarters, some large companies have raised significant financing from the market signifying the depth and ability of the market to provide such financing. We are confident of the ability of the market to provide the needed funds in the banking recapitalisation,” he added.
Yuguda concluded by advocating for continued collaboration with stakeholders to propel sustainable economic growth and position the Nigerian capital market as a beacon of opportunity for investors and enterprises alike. This collaborative approach is essential for fostering a vibrant and secure capital market that fuels Nigeria’s economic development.
If You Ask Me
If you ask me, the SEC’s initiatives, including the real-time market monitoring project, the National Investor Protection Fund, and its commitment to innovation, demonstrate a clear focus on creating a more robust and investor-friendly capital market. As these initiatives come to fruition, it will be interesting to observe the impact on investor confidence and the overall performance of the Nigerian capital market, that has been predicted to continue on it present bearish run.
