Nigeria’s capital markets can advance globally with young people, tech —Osinbajo

*Vice President Yemi Osinbajo

(Nigeria) With more room to redefine the exchange for international competitiveness and the largest concentration of young people in the primary market, Nigeria is in a better position to advance its capital markets locally and globally, says Vice President Yemi Osinbajo, SAN.

He made the disclosure in his keynote speech on Tuesday,  in Abuja at the first Capital Market Conference of the Nigerian Exchange (NGX) Group.

Later in the day, the VP presided over a virtual meeting of the National Economic Council where the Council composed of all State Governors, FCT Minister, Central Bank Governor, and Federal Government officials endorsed a memo on the Finance Bill for 2022.

Highlights of the bill was presented to the Council by the Minister of Finance, Budget, and National Planning, Mrs. Zainab Shamsuna Ahmed who explained that the proposed bill is intended to be passed alongside next year's budget.

According to the Minister, some of the proposed legislative changes cover domestic revenue mobilization, closing tax loopholes, public financial management and tax administration reforms as well as international taxation issues. She added that some of the principles of the proposed Finance Bill 2022 are to ensure fiscal equity, avoid double taxation, and support businesses especially MSMEs.

Members of the Council endorsed the Bill subject to a few observations to be made.

Meanwhile, while speaking on the NGX Conference theme: "The Future Ready Capital Market: Innovating for Nigeria’s Sustainable Recovery," the Vice President stated that, “every smart investor must be looking now at how to be a part of the miracle of the Nigerian Unicorns, the about five or six indigenous Nigerian companies (driven by young Nigerians) that became billion-dollar enterprises since 2015 in the midst of two recessions.”

The Vice President, who emphasized the digital transformation of the markets, highlighted the many opportunities this move would provide for the capital markets, which includes bringing in more young investors.

He advised the adoption of technology "to bring in a new crop of young investors, many of who use their smartphones primarily for engaging with commerce and banking activities today. And you have commendably begun the journey to the digital transformation of the market, following the highly successful example of the banks and, of course, the telcos."

The VP added, “today, the huge retail outlets already created by the telcos with well over a hundred million subscribers, the wide reach of banks, especially with the numerous financial inclusion initiatives, make this probably the most auspicious moment for digitizing the capital market to bring in the millions of new young retail investors.”

The VP also noted the efforts of the NGX Technology Board to attract tech companies he referred to as ‘the present and future tech unicorns’ to the market as a viable option for raising capital.

Osinbajo stated that technology will also give “more investors the opportunity to benefit from the phenomenal growth of these companies.”

However, he observed that “we must work gingerly to ensure that where policy may be involved, we enhance and not encumber the ability of these companies to raise capital quickly and efficiently. This, of course, will call for mirroring successful global best practices."

Prof. Osinbajo, who noted that this was probably the most exciting time in the history of capital markets in Nigeria, added that the African Continental Free Trade Agreement (AfCFTA) also offered exciting new prospects for cross-border listings, activity, and the formation of long-term capital.

“Your brand campaign, 'the Stock of which Africa is made of' which was well commended by Mr. President is not only imaginative but bold and focused. I think of importance now is that the NGX must work with government AfCFTA negotiators, especially as the process progresses to setting the rules in the service sector," he submitted.

Urging the NGX to see itself as a critical player in the AfCFTA negotiations, the VP added that “we are at a point where we are looking at negotiating Service Rules, we have looked at Rules of Origin already, so this is the time to come into play to get the best deals possible from all our partners all across Africa.” 

He further stated that with the successful completion of its demutualization process, “which fully commercializes the functions of the exchange as a corporate entity and importantly, separates the regulatory function to prevent conflicts of interest, the NGX can now focus on its core function of exploring new opportunities, leveraging strategic partnerships and transacting business to deliver profit.”

According to the VP, while its primary market not only has the largest concentration of young people, the NGX is “now positioned to reverse the trend of declining IPOs in capital markets worldwide, with offerings that are more business-oriented and less constrained exchange such as you have now.

“We also now have a greater room for redefining the exchange for international competitiveness. This is especially so as is currently being done, reviewing the governance framework and, of course, the profit orientation of the exchange means that investors can look forward to seeing more fast-growing companies listed on the exchange.”

On how the Federal Government is supporting the capital markets to become globally competitive, the Vice President stated government’s efforts in the AfCFTA negotiations, as well as policies to improve the economic environment, including the recent passage of the Petroleum Industry Act 2021, and incorporation of the Nigeria National Petroleum Corporation (NNPC).

He added that "next year, the Federal Government will further strengthen the frameworks for concessions and public-private partnerships, PPPs, especially as they relate to infrastructure."

Prof. Osinbajo also pointed out that the Government-backed N15trillion Infrastructure Fund being set up in partnership with the private sector will further help to bridge infrastructure gaps.

The VP observed that despite a significant withdrawal of foreign investors and domestic institutional participation in 2021, “the NGX in 2020 was the highest performing exchange with a return of 50% on the All-Share Index, when compared with 98 other exchanges tracked globally by Bloomberg.”

Prof. Osinbajo added that one of the ways to fast-track the return of foreign and domestic institutional participation is through effective collaboration between government agencies, regulators, and the Exchange.

Reiterating the Federal Government’s commitment to a partnership with the NGX, the VP observed that, “we need the capital markets for the economy and the capital markets need a thriving economy for its own growth.

“This government has shown its commitment to working with the NGX, in many ways, including the President's signing of the demutualization bill into law in 2018. So, the point of a reassuring business environment for foreign and local investors is not lost on us as a government.

“I believe that all government agencies, and regulators in our financial system such as the Central Bank of Nigeria, the SEC, PENCOM among other key stakeholders, realize that we must work with the NGX to ensure that the excessive risk premium within the market is abated and foreign investors are reassured of a transparent foreign exchange mechanism and other regulations that will enable them to channel their resources in and take their resources out with the least possible constraint.”

On climate finance, capital markets, and the benefits for Nigeria, the VP said the Federal Government and the NGX have taken the initiative of issuing the first African Sovereign Green Bond and the first Climate Bonds Certified Sovereign bond. 

“We became only the fourth nation in the world to issue one. The value of Nigeria's green bonds market has now hit $136 million within three years with four issuances recorded since the debut issuance by the Federal Government in 2017. And it continues to grow,” he said.

Prof. Osinbajo further highlighted the Federal Government’s Medium-Term National Development Plan 2021-2025 and collaboration with the private sector in its implementation.

"The Plan envisages that the economy will grow from about 3% this year rising to 6.33% in 2025. The key, of course, is the implementation of the Plan, which is expected to be supported by a range of measures of fiscal, monetary, and trade measures," according to the VP.

In his opening address, the Chairman, Nigerian Exchange Limited, Mr. A.B. Mahmoud, SAN, thanked the Vice President for honouring their invitation, while noting that the Conference is in line with the government’s economic growth plans.

The Conference also featured remarks by the Speaker of the House of Representatives, the Right Honourable Femi Gbajabiamila; Senator Ibikunle Amosun - who represented the Senate President, Ahmed Lawan; Conference chairman, and Chairman, BUA Group, Alhaji Abdul Samad Rabiu; and goodwill messages (via Zoom video) from His Royal Highness, Muhammadu Sanusi II; and the Director-General, Securities and Exchange Commission, SEC, Mr. Lamido Yuguda.

The event also had in attendance the Governor of Ekiti State and Chairman, Nigerian Governors’ Forum, Dr. Kayode Fayemi; Niger State Governor, Abubakar Bello; Edo State Governor, Godwin Obaseki; Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed; and the host of the Conference, the CEO, Nigerian Exchange Limited, Mr. Temi Popoola, among others.