Interview : Oscar Onyema
What are the prospects of the NSE broadening its current product offering?
OSCAR ONYEMA: The prospects are very positive. Earlier in 2018 we announced our strategic plan for 2018-21, which calls for the NSE to pivot towards a more customer-centric business model. Through the use of data analytics we aim to fully understand the demand for new products, and thus improve on our previous strategy of focusing on the types of products that emerging markets traditionally provide. It is important to understand local cultures, norms and interests. For example, securities lending and short-selling products, which have been on the market since 2013, have failed to attract sufficient attention. Similarly, it has been a challenge to activate the alternative securities market, NSE’s small and medium-sized enterprise (SME) board.
Some of this low activity can be explained by factors including the lack of collateralisable assets held by agri-businesses; an underdeveloped SME ecosystem that requires education about corporate governance; and the need to communicate more clearly that one of the most viable ways to raise capital is through capital markets. In the services sector, meanwhile, a lot of companies are not properly organised, and there are insufficient tax incentives for companies in this segment to be listed on the exchange.
How can capital markets play a more significant role in boosting infrastructure development?
ONYEMA: Financing is key to closing Nigeria’s infrastructure gap, and capital markets are a viable platform for raising funds for projects. Under the Pensions Reform Act of 2014, pension funds are allowed to invest 5% of their assets in infrastructure projects, which they can do through the capital markets. The introduction of the green bond has been significant, as a lot of the funds that go into them finance environmentally sustainable infrastructure. There has also been an increased drive to create inclusive products, such as sukuk (Islamic bonds), through which state governments and other issuers can address specific financing requirements, like infrastructure.
What role do key emerging technologies play in advancing Nigerian capital markets?
ONYEMA: The country’s financial technology industry has a lot of potential. It has garnered global recognition and as a result attracted high-profile investments. The next step is to begin to examine technologies such as blockchain and artificial intelligence. The NSE has taken various steps to drive innovation, including moving from paper records to a fully digitised environment. Discussions are ongoing about the possibility of a digital initial public offering platform, which would let people across the country raise capital using their smartphones. Technological innovations such as these will create new ways to perform the same tasks more efficiently. In terms of the regulatory environment, and we expect policy to create an environment in which new ideas are encouraged.
How is the NSE supporting the sustainable growth of both domestic and regional capital markets?
ONYEMA: Governance is key to creating sustainable growth. For this reason, most of the work we have done on sustainability is in this area. We have developed the Corporate Governance Rating System, through which over 350 directors have been certified and also made aware of their fiduciary responsibilities. For the NSE’s largest listed companies with the highest levels of corporate governance there is the Premium Board, which is attracting the large-portfolio investors. Alongside this, the sustainability working group at the African Securities Exchanges Association is disseminating best practices and in doing so, helping smaller African stock exchanges to be able to learn from their more experienced counterparts, furthering these developments at a regional level.
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