How SEC is Unlocking Capital Market Potentials

The Securities and Exchange Commission (SEC) understands that Nigerian capital market has amazing potential to serve as a catalyst for getting more people into the financial services industry.

From financial inclusion projects, deepening non-interest finance plans, campaign on e-dividend; push to get power companies and telecom firms listed on the Nigerian Stock Exchange are initiatives initiated by SEC Director-General, Mounir Gwarzo to unlock Nigeria’s economic potentials and create wealth for the people.

Gwarzo believes that the potentials of the Nigerian financial market are enormous and have to be unlocked early to create wealth for the nation. The SEC boss is therefore implementing key policy initiatives meant to deepen the Nigeria financial market, secure investors’ confidence and drive investment with new technologies.

Like the Central Bank of Nigeria (CBN), SEC under its new leadership is aware of the impact of bringing more people into the financial market net and creating seamless dealing platforms that raise confidence level in the market. These policies are not only sustaining investors’ interest, but deepening the financial market.

The e-dividend management system, which was launched last year by the SEC in collaboration with the CBN and the Nigeria Interbank Settlement System (NIBSS) to enable investors have direct access to their dividends are already enjoying some level of compliance from the investing public.


For Gwarzo, the commission’s concern was to bring back retail investors to the nation’s capital market confident that in the next 10 years, SEC would raise the participation of the retail investors to 45 per cent from less than two per cent presently.

He is also aware of the benefits of attracting cheap funds into the financial market and getting key sectors of the economy including power, telecom, oil and gas listed on the local bourse as such practice would not only create more tax net for the country, but serve as engine room for economic development.

The SEC boss has said the Nigerian capital market has amazing potential to serve as a catalyst for financial inclusion. While most people identify capital markets as important sources of medium-to-long term capital, few realise their amazing potential to serve as catalysts for bringing so many people into the financial services sector in the interest of the economy.

SEC is determined to unlock this potential of the Nigerian capital market. In particular, we are aware of the need to deepen the non-interest capital market space. This is to enable millions of Nigerians and people of faith to invest savings ethically. Investors worldwide are increasingly allocating their resources into Islamic finance products.

The SEC boss also has interest in deepening the non-interest banking segment of the economy. Statistics show that total assets under management in the global Islamic finance industry had surpassed $2 trillion (N394 trillion) by the end of 2014. The global sukuk market continued to witness remarkable growth since after the 2008 global financial crisis with annual issuances growing from $15 billion in 2008 to almost $120 billion in 2014 and Nigeria should key into it.


Last year is widely considered a landmark year for Islamic finance, especially with debut sukuk issuances by countries such as the United Kingdom, Hong Kong, Senegal, South Africa, and Luxemburg. There is no doubt that the sukuk market is emerging on a global scale as a viable alternative source of funding.

In Nigeria, SEC has implemented a number of reforms aimed at deepening the non-interest capital market. The Commission focused on the regulatory framework, reviewing the Rules and introducing new ones.

It has issued rules on Islamic Fund Management as well as rules on Sukuk issuance. These two legal frameworks have encouraged Islamic product innovation with the registration of five ethical/shariah compliant funds and the issuance of Nigeria’s first ever sub-national Ijara Sukuk by the Osun State government in 2013 which was oversubscribed. It is also considering modalities for setting up a Sharia Advisory Council as a body of experts to advise SEC and the market on non-interest product and their applications.
SEC is also, closely with the Debt Management Office (DMO) to ensure Nigeria issues her first sovereign sukuk that will provide the needed benchmark for other categories of issuers.

Besides, deposits from non-interest banking could be deployed into infrastructure funding and other developmental projects as Nigeria remains a huge market for non-interest banking given its large population base.

Aside need to deepen Islamic finance market, the SEC is absorbing the cost of e-dividend registration for investors that register on time. The commission has achieved over 4,000 per cent growth in the number of investors that registered to have access to their dividends in recent months.

The e-Dividend management system was meant to enable investors have direct access to their dividends. The Commission has also embarked on various initiatives like e-Dividend, Direct Cash Settlement, National Investors Protection Fund (NIPF) among others to attract retail investors to the market.

The need to deepen the market is key. For instance, Nigeria has less than two per cent participation of retail investors in our market. Malaysia has nine per cent, South Africa 19 per cent, United States of America 43 per cent, and United Kingdom 13 per cent. So, retail investors are yet to fully key into the Nigeria market and the dominance of the foreign investors means that anytime they move out of the market, the market goes down. SEC, under Gwarzo, is therefore ensuring that in the next five to10 years, the level of involvement of the retail investor is raised to at least, five per cent.

The SEC is also leading moves to get the power generation and distribution companies, and telecommunications firms operating in the country quoted on the Nigerian Stock Exchange and/or the NASD OTC securities market. The continued absence of the companies from the NSE and NASD is making the country to lose huge revenue through taxation.

The very high percentage of taxes paid to the government comes from quoted firms. It is, therefore, in the interest of the country that these companies and more are listed on these markets.


The SEC D-G insists that listing by the firms would give the capital market the required depth to drive economic growth for the country.

The SEC, CBN and other stakeholders are already addressing regulatory gaps and market structures hindering financial inclusion for the unbanked Nigerians. Having an account or financial wallet is the first step for the poor unbanked population to move out of poverty line and any policy that discourages this step is distasteful.

Banks and government are expected to avoid any steps that would discourage the poor Nigerians from embracing banking services.

The SEC under Gwarzo is already ensuring that all people, especially those with the fewest resources have access to the opportunities they need to succeed in life by investing in the capital market. He believes that financial inclusion is a key driver for economic development and growth even as access to financial services improves the lives of the poor.

The achievements of Gwarzo within a short time of taking over the leadership of SEC, have earned him several recognitions.

He has in March this year, unanimously re-elected to continue providing leadership to the Africa Middle East Regional Committee (AMERC) of the International Organization of Securities Commissions (IOSCO) as its Chairman. The AMERC comprises securities regulators who are IOSCO members within the Middle East and North Africa as well as sub-Saharan African regions. He would serve for another term of two years.

Gwarzo’s reelection is a clear testament to Nigeria’s growing influence and improved image in the international community, but also a strong indication of the overwhelming support he enjoys among peer regulators following a very successful first tenure.

It would be recalled that in February 2015 members of the regional body elected Gwarzo as Chairman of AMERC during their 34th annual meeting in Muscat, Oman to complete the outstanding term of his predecessor. Upon his election, he had outlined to members his agenda for the regional committee pledging to focus on advancing issues that improve voice, visibility and inclusiveness for African/Middle Eastern markets while working towards more cooperation, especially to boost capacity building and cooperation.

This agenda aims to tackle three major challenges facing the frontier and emerging markets within the AMERC region which are dearth of capacity, inadequate visibility and poor level of integration. By this unanimous reelection, members have expressed desire to see Gwarzo continue to lead the Committee to keep addressing these challenges. For example, AMERC members had for years been yearning for the inclusion of Arabic as one of the official languages of IOSCO since about 50 per cent of the member countries within the AMERC region are Arabic-speaking nations.

Knowing that adopting Arabic will engender greater visibility and participation in IOSCO’s decision-making, Gwarzo promised to vigorously advocate its adoption by the IOSCO Board. He persuasively argued on the importance of the systemically important Arabic-speaking member jurisdictions who regulate capital markets worth trillions of dollars in combined capitalization. His argument has been effective as the IOSCO Board recently considered and approved the adoption of Arabic as one of its official languages, a decision that pleases countries like Saudi Arabia and the UAE but also elevates the inroads non-interest finance could begin to have on the global financial system.

In the area of capacity building, Gwarzo’s tenure has been even more remarkable. He has championed ideas within the IOSCO Board that will enhance the capacity of AMERC markets, especially tapping from their more developed counterparts in Asia, Europe and North America. Three notable ideas are already being implemented by IOSCO and will certainly be critical to addressing capacity gaps, particularly in frontier markets within the AMERC region. They are the establishment of regional hubs, the roll out of an online toolkit and commencement of a global certificate programme.

In fact, Mr. Gwarzo was chosen by the IOSCO Board to lead the first effort by facilitating the setting up of a pilot regional hub for capacity building for the AMERC region. The hub will be domiciled in Dubai, an internationally accessible travel destination. It will integrate a tailored program of regionally focused workshops, seminars and conferences to be delivered by experienced regulators and members of the academia. The hub will deliver an exceptional platform for members to exchange expertise, experience and knowledge. Considering the resource limitations facing African countries, Gwarzo has advocated for scholarships within the design, sponsored by IOSCO, to subsidize the programmes so that countries are able to enhance their capacity within a modest budget.

The second idea, creating an online toolkit, aims to leverage technology to make information and knowledge sharing among regulators as seamless as possible. It will be a rich bank of data, information and resources from which regulators can frequently tap in their day-to-day operations. This is particularly useful for emerging market jurisdictions that require more resources to achieve capacity building tools as the toolkit comes in handy and at no cost. In addition to these efforts, Gwarzo has focused on partnering with fellow IOSCO members within sub-Saharan Africa to benefit from capacity building programmes of bigger markets such as Nigeria.

Prior to Gwarzo’s first election, West Africa was the least integrated capital market of all other sub-regions within AMERC. Following discussions with counterparts from Ghana and the francophone West Africa, Gwarzo hosted in Abuja, discussions which led to the establishment of the West African Securities Regulators Association (WASRA).

Gwarzo has indeed remained a vibrant voice in the Nigeria as well as regional market integration and development.

Ume is a Financial Analyst based in Abuja


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