INTERVIEW: Fleeing investors will return to Nigeria after 2019 election, says SEC acting DG

Mary Uduk, acting director general of the Securities and Exchange Commission (SEC), says the recent outflows experienced in the Nigerian capital market will be remedied when the 2019 general election is concluded.

In a session with journalists at the just concluded 2018 annual meetings of the World Bank Group and International Monetary Fund, Uduk who was appointed by Kemi Adeosun, former minister of finance, gave an update of her activities since she assumed the position at the commission.

In the past few months, we have seen a persistent decline in capital market activities and have also seen an outward movement of capital. What is responsible for this?

Uduk: If you look at the global market report that was released yesterday and what we already know in respect to the increase in interest rate in advanced countries, especially in the US, a lot of time, foreign investors find such increases attractive, particularly as it has to with advanced countries that their economies are very stable. And therefore, it most likely normal for a lot of them to want to move their investment to frontier market which Nigeria is one of them and therefore to take advantage of the increase in rates in such advanced countries. We want to believe that that is one of the things that was causing the current downward trend in the stock market in Nigeria.

Another reason could be the forthcoming general election, which if you are an investor, a lot of them would also want to reduce their exposure or totally move it out or adopt a wait and see attitude to see the outcome of the election to keep their investments safe. So, I am very sure that after the elections, they would come back and even increase what they have. Usually, such things happen at times like this. So, I do not really see any problem in that direction. Our stock market is very strong. It is just a temporary thing which I believe after the election, things would normalise.

Market development is one of the initiatives in the master plan. What efforts has SEC made so far to attract retail investors?

Uduk: We do not take for granted the presence of foreign investors in our market, especially the transparency, the liquidity that they bring to the market. We are also very particular about our domestic investors which I would say are the foundation of the market, that when foreign investors leave, they are the ones that stay to still make us have a market. There are certain initiatives that we have come up with to build confidence and encourage their participation one of which is zero tolerance in market infraction.

There are certain initiatives that we have come up with to build confidence and encourage their participation. One of them is zero tolerance on market infraction. We have also put in place Complaint Management Framework, we have in place other initiatives like Risk Based Supervision as well as the ongoing e-dividend mandate and Direct Cash Settlement.

e-dividend is one of the game changers on this market and a lot of people are embracing it. As we already know, the forms are on the SEC website for prospective investors to download and get registered. We have carried out many enlightenment programmes in different locations in Nigeria to sensitise investors in respect of this initiatives.

We are also looking at deepening the market by coming up with new products like derivatives, non-interest capital market-related products as well as trying to build the commodity ecosystem. Our rules on derivatives are ready and have been exposed to the market. We are also building in-house capacity to ensure we are able to carry through all of these initiatives.

We are also working on automating the processes of the commission to make sure we work well with the market. Most of the market operators are already automated and for those who are not automated, we encourage them to do so and also put in place processes that will help strengthen the market at their level.
In respect of building the commodity ecosystem, we have a strong standing committee working on that. We are also embracing technology which is an important field of this meeting.

To that extent, we have a dedicated department for FINTECH and we also have a standing committee to also come up with their own FINTECH for the capital market. And we also encourage the FINTECH association of Nigeria who are working on capital market-related platforms that they should collaborate with the commission and build a capital market that is technology savvy.

Any update on e-dividend enrolment?

Uduk: As at the last CMC meeting in August, 2.55m investors have registered, we will get an update on that figure during the next CMC in November.

Any reason for the slow pace?

Uduk: No, I have not received any complaint. What I want to believe is that for those of them who haven’t come up, it is probably because they haven’t gotten to hear about it. I don’t think people are resisting it, they are just not aware, and we are working on it. I am expecting that many more people will come to the platform.

Any update on MTN?

Uduk: We are still expecting that MTN will come to the market, what we cannot say is when they will come. We also have a New Listings Committee of the CMC whose responsibility includes fashioning out ways for these multinationals and other companies already not listed to list. The committee is meeting with some of these companies and we hope that very soon they will have breakthroughs.

What is the take away for the SEC from this meeting?

Uduk: We have gained a lot of knowledge from this meeting, but a major take away has been technology-related discussions. The world is moving towards digital technology and as regulators; we have to be ready to step up our regulations. A lot of those are what FinTech Association of Nigeria is already working on in Nigeria. We are willing to collaborate with them so that the SEC is not left behind.

Last month or two months ago, we invited them to the Commission’s headquarters for a presentation to staff on what it is all about particularly the areas that affect the commission like RegTech, Blockchain, Initial Coin Offerings which are things we are already working on. This goes to re-emphasize that technology is the future and we have to move with the trend as regulators. It will also help our work and make the market better.