Insurance can double OTC debt capital market to $54bn

The existing gulf of $105 billion between Nigeria’s Over-The-Counter (OTC) Dept Capital Market (DCM) and that of South Africa, despite rising interest can only be closed with insurance sector contribution.

Stakeholders at yesterday’s FMDQ workshop in Lagos were unanimous in their submission that Nigeria’s $27 billion debt capital market is not enough to experience inclusive growth compared to South Africa’s $132 billion.

They said a doubling of this sum to $54 bn would make the difference.

They were concerned that the insurance industry is not playing its role due to capacity issues that need to be addressed and lack of major reforms in the sector.

Also, they were of the view that the insurance industry is fragmented and needs more consolidation for a bigger sector.

“If we can turn around the insurance industry, it can become the pillar that can develop the debt capital market”, Oluwatoyin Sanni, group chief executive officer, United Capital plc, said at the workshop in Lagos.

Sanni affirmed that the insurance industry needs to play its role as a significant institutional investor and and in credit enhancement in terms of underwriting of bonds to support  Small and Medium Enterprises (SMEs) that want to come to the debt capital market, and generally to support the growth of the market.

Other panelists who spoke at the workshop including Victor Ogiemwonyi, president, Association of Issuing Houses of Nigeria (AIHN), Adebisi Ajiboye, managing directo/CEO, Global Credit Rating Co limited, Michael Larbie, managing director/CEO, Rand Marchant Bank Nigeria limited, Abbas Abdulkadir, deputy director, Securities Offering, Securities and Exchange Commission (SEC) and Chuka Eseka, The Nigerian DCM Workshop Visioning Team, agreed that there is potential to double the size of the debt capital market in the medium term if there is collaboration between the regulators, operators and issuers.

They observed that there were challenges in the environment around interest rates, inflation and exchange rates, among others.

“To get the debt capital market to take place, interest rates should be addressed”, Ogiemwonyi said during the panel discussion.

“We advise issuers to stick to the highest level of corporate governance and transparency because ultimately it pays the more. The size of the bond market is $27 billion and that could double in the medium term if all parties play their role”, Sanni added.

The debt capital market is seen by the International Finance Corporation (IFC) as one of the three types of infrastructure (physical, social, and financial infrastructure) critical to developing a country.

HOPE MOSES-ASHIKE