Good morning and welcome to the 2017 edition of the Annual Conference of Capital Market Correspondents Association of Nigeria. For the capital market, this event is very important as it assembles journalists, business editors and other stakeholders in the business of reporting on issues affecting the capital market in Nigeria.
The Securities and Exchange Commission has encouraged this initiative, setting aside a prize which some of you have won in the past for excellence in reporting on matters affecting the capital market. Granting interviews and periodic release of public notices have also helped to keep the media informed about the developments in the market.
As you know, the Press Briefing organised in the wake of each CMC meeting, has been one of the most important ways of communicating to the media efforts of the stakeholders in the capital market to regulate, develop and deepen the market.
The capital market is more resilient and is on a steady growth trajectory. The capital market correspondents have contributed to the development of the market and we are glad to have you all in this collective task of developing and deepening the capital market.
The capital market correspondents have taken on an increasingly important role of communicating to the public some of the Commission’s initiatives aimed at developing the market. Permit me to sketch a few of the initiatives which we pursue as a means of enhancing the capital market contribution to economic growth and development. They also support government policy of ease of doing business.
Dematerialization is concerned about moving from physical to digital manifestation of asset ownership. The Securities and Exchange Commission in its assiduous task of implementing the capital market master plan has in partnership with stakeholders taken all necessary steps to promote the quest for dematerialization. Prior to the CMMP less than 40% of share certificates were dematerialized. This was the state of affairs by June 2015, more than 20 years since the establishment of the Central Securities Clearing System (CSCS).
A host of problems were associated with the physical forms of share certificates. Losses of certificates and/or damages to them were often reported, with the attendant costs for investors and capital market operators (CMOs). It is heartening to note that these problems are now things of the past. The SEC was able to achieve this by spearheading the process of digitalization of share certificates in partnership with CSCS and Capital Market Committee (CMC).
This enabled us to develop a dematerialization form which investors were requested to fill in and submit to CSCS through their registrars. By the second quarter of 2017, the process had paid off, with nearly all share certificates now digitalised, thus completing the process of dematerialization and therefore overcoming the problems associated with damages to or loss of physical share certificates.
Direct cash settlement: Before the advent of the direct cash settlement, investors could not receive proceeds of sale of their shares directly. In those days, when shares were sold, the proceeds were credited to the accounts of their brokers before being remitted to the investors. The process was fraught with a number of pitfalls, such as delays in remittances, or even frauds and other forms of infractions. Many complaints were received from investors especially about delays and non-remittance of funds by brokers. We have now kept such practices at bay.
E-dividend management system: Moving in tandem with the direct cash settlement is the e-dividend management system, which promotes a more efficient form of dividend payment to shareholders. Until recently, less than 20% of investors had dividends posted directly to their accounts. The concomitant deleterious effects for investors were clear.
The postal system was weak, and cases of losses of dividend warrants were often reported. To overcome these challenges that hampered investment in the capital market, the SEC partnered with the CBN and Nigerian Interbank Settlement System, NIBSS, to develop an electronic platform for enrolling all shareholders into the e-dividend platform.
Once enrolled, dividends are credited directly into investors’ bank accounts against the current system that relies on posting dividend warrants. The ease of dividend payment can significantly boost retail investor confidence, curb unclaimed dividend phenomenon and encourage more Nigerians to save and invest.
National Investor Protection Fund: It will be recalled that from a peak of N12.6trillion in March 2008, the stock market suffered a setback arising from the global financial crisis, plummeting to N7.3trillion by December of that year. Retail investors became apathetic to investment in the capital market.
In order to restore their confidence, the National Investor Protection Fund was set and inaugurated by the SEC board. To date, hundreds of investors have benefited from the fund, which enabled them to get protection in the event the crash.
There are a host of other measures the commission is pursuing to develop the capital market in a bid to make the dream of making the market the most developed in Africa by 2025 a reality. In macroeconomic terms, these measures are aimed at making the LM curve flatter as investors become more and more attracted to the market.
Complaint Management Framework: SEC recognizes capital market trade groups, operators and listed companies to establish policies on complaint management; this requires senior management of operators and listed companies to endorse the policy of SEC on complaint management framework. The framework ensures that complaints are resolved within the trade groups and only unresolved complaints can be referred to the SEC.
National Investor Protection Fund (NIPF): Section 13k of the Investment and Securities Act, (ISA) 2007 empowers the SEC to establish a National Investor Protection Fund (NIPF) to compensate losses of investors who are not covered by the Investor Protection Funds operated by Securities Exchanges and Capital Trade Points. The NIPF was incorporated in March 2012 with an endowment fund of ₦5billion initial amount. The maximum amount which an investor can claim from the fund is ₦200,000.00.
Corporate Governance Code and Scorecard: In order to improve corporate governance, the Securities and Exchange Commission, in September 2008, inaugurated a National Committee chaired by Mr. M. B. Mahmoud SAN for the Review of the 2003 Code of Corporate Governance for Public Companies in Nigeria to address its weaknesses and to improve the mechanism for its enforceability .
The provisions of the Code have now been made mandatory for all public companies. To assess compliance with its provisions, a Scorecard was developed by the Commission and launched in 2015 with the assistance of International Finance Corporation (IFC). The essence of this initiative was to improve Corporate Governance practices, thereby improving attractiveness and investment in securities of companies perceived to possess high Corporate Governance standards.
Non – Interest Products: A laudable initiative was our engagement with DMO which led to the pronouncement of the first issuance of a sovereign sukuk in 2017. A SEC/DMO inter-agency committee worked out modalities towards achieving this successful milestone which was oversubscribed by 6%. Furthermore, we have held numerous engagements with other agencies such as the CBN, NAICOM and PENCOM towards promoting and improving the acceptability of non-interest products.
Issuances: As at September 2017, the total value of issuances in the market amounted to N1.55 Trillion Naira with Equities accounting for 12%.
Secondary Market: total equities transactions rose by 78.6% to N1.655tn between 2016 and September 2017, foreign transactions increased by 47.31% during the period
NSE ALL Share Index: the ASI has returned 47.11% as at Thursday, 7th December 2017 which is a remarkable recovery for the Exchange.
FMDQ: Total turnover in Aug’17 was N12.9trn and N12.18trn in Oct’17 with Treasury Bills dominating activities
NASD: Trade on the floor was valued at N352.42m in Oct. 2017, 22.4% higher than the level for January 2017.
Market Development Activities
The SEC designed and implemented laudable programs to create more awareness and further deepen the market. Recently, the Commission embarked on an outreach in some area councils of the FCT.
SEC joined its counterparts all over the world to mark the IOSCO world Investors week in Abuja and Lagos bringing together stakeholders, investors, and students to promote financial inclusion.
An Investor Education Portal dedicated to educate investors of financial literacy and activities of the capital market has been designed and contents uploaded. The portal will soon become accessible to all.
Further to the Commission’s commitments to ensure market efficiency, accountability and transparency in the Capital Market, the Commission wishes to assure the investing public and all stakeholders of its commitment to ensuring an uninterrupted and orderly operation of the market and the regulations thereof.
In this regard, the role of the press is critical to achieving these objectives. I would therefore enjoin the media to continue to support the Commission in disseminating information about the capital market.
Accordingly, the Commission is poised to continue to ensure the stability of the Nigerian Capital market and maintain the high level of investor confidence observed in the market. We are always available to provide clarification on any issue.