The Securities and Exchange Commission (SEC) has said that the Non-Interest Capital Market (NICM) has so much potential in Nigeria as it has the prospect of attracting a large pool of untapped investor base who has apathy to conventional instruments, to participate in capital market as well as the existing investors who seek to diversify their portfolio.
Mr. Lamido Yuguda, Director-General (DG) of SEC, stated this at a Joint IFSB/SEC Nigeria Virtual Seminar on Investor Protection and Transparency in Islamic Capital Markets held over Weekend.
He said the level of activity in Non-Interest (Islamic) Capital Market that is currently being witnessed in the country affirms the overwhelming acceptance of NICM products by the investing public.
He recalled that recently the market witnessed the entrance of institutions offering Islamic capital market services/products and also witnessed the issuances of Federal Government of Nigeria (FGN) in the Sukuk Market with latest issuance of FGN SUKUK oversubscribed by over 400 percent. This, he said, further buttressed the need to enhance the SEC’s investor protection mechanism in order to ensure transparency in the market.
The SEC boss stated further that investor protection is the principal plank of regulation and transparency; a building block that enhances the growth of the capital market, adding that the knowledge gap that often exists between the market players and investors demand for more transparency; and the risks faced by investors require reasonable level of protection by the regulator in order to build confidence and trust in the market.
According to him: “Capital markets all over the world thrives on trust; it is believed that enhancement of investor protection and increased transparency will have a multiplier effect on investments and sustainable growth of the economy.
Additionally, in ensuring that investors are well protected, Yuguda said that a framework for complaint management was put in place to fast-track and streamline the dispute resolution process in the market. This, according to him, is to foster and secure investors’ confidence in the market.
“It is worthy to also note that the 10-year strategic Masterplan (2015-2025) for the Capital Market includes a section on NICM that recommends various initiatives aimed at developing this sector. While some of these activities and programmes have been implemented, a lot more work is ongoing to unlock the full potential of NICM.
“It is a well-known fact that COVID-19 pandemic has brought about a new normal to the global economies – including the Nigerian capital market. Hence, this seminar could not have come at a better time. The need to promote and increase awareness of investor protection mechanism and transparency requirements are considered essential to engendering investor confidence and trust in the financial system, which is crucial for the growth and development of the market”, Yuguda further said.
On shariah review and certification with respect to NICM, he said the provision of two levels of shariah review and certification is meant to further serve as added measure towards investor protection. This is coupled with the requirement for continuous review\certification of the shariah expert throughout the tenor of the transaction.
He also said: “We are happy to note that non-interest financial activities are developing exponentially across all sectors of the Nigerian financial system. Indeed, we expect that the market will soon witness substantial investment from the pension industry which will be a game changer that would spur more issuances of NICM by corporates and other categories of issuers.
Yuguda noted that the SEC Nigeria has not relented in its efforts to discharge its primary mandate of regulating and developing the Nigerian capital market; the protection of investors has been one of the key focus. Numerous initiatives being implemented in this regard include the establishment of the National Investor Protection Fund (NIPF) aimed at compensating investors who incur losses arising from the insolvency, bankruptcy or negligence of a capital market operator; the e-dividend registration and payment system, dematerialisation and direct cash settlement system, all aimed at ensuring an efficient process of securities transaction and elimination/minimising cases of unclaimed dividend.
The purpose of the seminar which is the second collaboration between the SEC and IFSB in 2021, was to enlighten stakeholders on the protections available to investors and of the level of transparency inherent in the NICM.