SEC: Highlights From The 2nd 2023 Capital Market Committee Meeting Held On August 24th

The Capital Market Committee (CMC) convened its second meeting of the year 2023 on 24th August, 2023 to engage in comprehensive discussions on pivotal matters influencing the capital market.

The meeting also served as a platform for receiving crucial updates from both regulators and operators.

The event underscored the committee’s unwavering commitment to advancing the development and orderly functioning of the Nigerian Capital Market, reflecting a shared dedication to its growth and stability.

During the meeting, the Chairman of the CMC extended heartfelt gratitude to the capital market community for their invaluable contributions and steadfast support. Their active participation has played a pivotal role in the Commission’s relentless efforts to cultivate a resilient and dynamic capital market ecosystem.

Two Hundred and Seventy-Seven (277) stakeholders, comprising Management and senior staff of the Commission, Capital Market Operators (CMOs), representatives of relevant government agencies including the Central Bank of Nigeria (CBN), Debt Management Office (DMO), Federal Inland Revenue Service (FIRS), Investments and Securities Tribunal (IST), National Insurance Commission (NAICOM), National Pension Commission (PENCOM), and Financial System Strategy 2020 (FSS2020) participated in the event.

The Chairman highlighted the positive impact of recent peaceful national elections on the stock market. He stated that the inauguration of the President and Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria, Asiwaju Bola Ahmed Tinubu, led to a remarkable 5.23% surge in market capitalization at the NGX on his first day, driven by optimistic anticipation of market reforms.

The Chairman acknowledged the prevailing challenges arising from demanding macroeconomic conditions, constrained consumer spending, and rising operational costs. Despite these challenges, he noted that there remains a shared sense of optimism that ongoing rigorous reforms will rejuvenate the nation’s economy.

He emphasized the need for a resolute support of the Capital Market to the Federal Government in navigating these challenges for the country’s brighter future.

He also stated that the road ahead is undeniably challenging and the capital market must step forward in whatever way to lend its helping hand to the current economic reforms, adding that the market must make sacrifices to help drive the economic transformation that will change our nation’s fortunes for the better.

The Chairman gave updates on a series of significant happenings since the previous meeting in April 2023.

He informed the meeting that the Investments and Securities Bill (ISB) 2023 was under consideration by the 10th National Assembly.

The Bill aims to align regulations with the modern dynamics of the market and it is hoped that if passed into law, it will enable optimal contribution of the capital market to national development.

He stated that a round table discussion had gathered valuable inputs from market participants which would be put together for the new administration, underscoring the commitment to reposition the capital market as a driver of economic growth in line with the vision of the new government.

He highlighted efforts to strengthen the market’s attractiveness, including streamlining listing processes, advocating for smoother issuances, and encouraging private equity involvement in the infrastructure sector.

Also discussed was the importance of Sustainability, that has emerged as a focal point, with Nigeria hosting the African launch of the International Sustainability Reporting Standards, signaling the country’s pivotal role in shaping global reporting expectations.

The Chairman notified members on the need to counter unauthorized financial entities, unregistered products and cyber threats. Market players were urged to prioritize cybersecurity measures to safeguard sensitive financial data and transactions.

The Chairman lamented the trend of companies choosing to de-list from the capital market. Emphasizing the significance of this matter, he affirmed that the SEC actively collaborates with the Exchanges to enhance approval procedures, aiming to render listing processes more streamlined, more efficient, and economically viable.

In addition, he revealed that advocacy initiatives were underway to address hurdles related to issuances and to motivate prospective issuers to consider market-based funding options.

Members were reminded about a series of circulars issued by the Commission aimed at protecting investors from the activities of unregistered schemes. Specifically, the chairman reiterated the Commission’s warning to the public regarding the activities of Binance, Luno, PaxFul, Coinbase, and other unregistered platforms, as investing in crypto-assets carries a high level of risk and may result in total loss of investments.

Members of the CMC were given updates on actions taken towards taking Nigeria off the Financial Action Task Force(FATF) Grey-List. Efforts already made by the capital market include the SEC having amended its Anti Money Laundering and Countering the Financing of Terrorism Financing (AML/CFT/CPF) Regulation 2022 in line with the findings from the National Residual Risk Assessment (NRRA) exercise.

New frameworks on the implementation of Targeted Financial Sanctions (TFS), Risk-based Supervision and guidance on Politically Exposed Persons (PEPs) were developed for the market. Meanwhile, a sector-specific entity risk assessment framework is being finalized.Members were also informed that SEC had conducted extensive outreach, sensitization and training programs for Capital Market participants on new obligations, in collaboration with development partners and other stakeholders.

This is aimed at ensuring compliance and protecting the market from abuse by criminals. Members received updates from CMC Technical Committees, as well as heads of various Exchanges. As part of its accomplishments, the Technical Committee of the Commodities Trading Ecosystem disclosed that a two-day workshop was conducted in Lagos by the Commission and Federal Ministry of Mines and Solid Minerals Development (FMMSD), which was well attended by the Association of Issuing Houses of Nigeria (AIHN), Fund Managers Association of Nigeria (FMAN), and Commodities Exchanges.

The event explored capital market funding options for the solid minerals sector. It brought together 57 mineral companies, government officials, and capital market operators.

The workshop provided insights into funding opportunities, requirements for mineral companies, the role of commodity exchanges, sector challenges, and government initiatives for improvement of the mineral sector.

The E-dividend Mandate Committee provided update on the project to enhance the e-Dividend portal, in collaboration with the Institute of Capital Market Registrars (ICMR) and the Nigerian Interbank Settlement System (NIBSS).

The Financial Literacy Technical Committee revealed plans to organize a Regional Investor Awareness conference in Kwara State scheduled for October, 2023 specifically targeting tertiary institutions within the state. Additionally, the Committee informed members about plans for a pilot test of the Capital Market Studies (CMS) project by the Nigerian Educational Research and Development (NERDC).

The Non-Interest Capital Market Products (NICMP) Technical Committee shared significant updates on what had occurred since the last meeting, including noteworthy developments such as the release of a revised framework by PENCOM for establishing the Pension Industry Non-Interest Advisory Committee (PINAC). The Advisory Committee will ensure the rigorous adherence of investments within the Non-Interest Pension Fund (Fund VI) to Shariah principles.

The Technical committees’ discussions also covered strategic plans to enhance awareness about Fund VI and establish interactions with various entities to facilitate the creation of Shariah-compliant instruments for the commodities market. Additionally, the Committee highlighted the need for collaboration with the DMO for the development of short-term Sukuk securities.

With a strong emphasis on cooperation, the Committee underscored the pivotal role of joint efforts among Pension Operators (PENoP), PENCOM, and other stakeholders to elevate awareness and encourage active participation in the Non-Interest Pension Fund VI.

The registered Exchanges present at the meeting informed members that Nigeria outperformed global indices on gains in the All Share Index and market capitalization.

This exceptional performance could be attributed to several factors, such as; the appealing dividend yields offered by certain stocks, the recovery of corporate earnings, and a notable improvement in sentiments among domestic retail investors.

Also, all indicators reflecting investors’ involvement – including volume, value, and the number of transactions – had demonstrated consistent month-on-month increases throughout the first half of 2023.

The meeting underscored the Capital Market Committee’s dedication to propelling Nigeria’s economic growth, fostering collaboration, and embracing innovation to build a thriving future for Nigeria. It once again offered the capital market as a viable source of infrastructure financing for development.

From

Lamido A. Yuguda, Director General Securities and Exchange Commission, Nigeria