AfDB, SEC sign $460,000 pact for market surveillance system project

The Securities and Exchange Commission (SEC) and African Development Bank Group have signed an agreement for a $460,000 grant to implement market surveillance system project that will hopefully modernise Nigeria’s capital market and position it to support economic transformation driven by private sector investment.

The grant is to finance technical assistance and capacity building for capital markets development under the “Nigeria Securities Market Surveillance System Project”.

Lamin Barrow, Director General African Development Bank Group said the grant from the Capital Markets Development Trust Fund (CMDTF) – a multi-donor trust fund administered by the African Development Bank-and supported by the Ministry of Finance of Luxembourg and the Ministry of Foreign Trade and Cooperation of the Netherlands, will support the acquisition, installation and deployment of a real-time automated securities market surveillance system of the Nigeria capital markets.

“Today’s ceremony marks yet another important milestone in our partnership and efforts to modernize Nigeria’s capital markets and ensure that it is well positioned to support economic transformation driven by private sector investment.

“The introduction of a surveillance system will enhance oversight over securities trading across all existing and future trading platforms and all tradable securities and products by the SEC. It will therefore preserve securities market integrity, boost investor confidence and enhance financial inclusion, among other expected outcomes,” Barrow said at the signing ceremony.

To ensure sound implementation and sustainability, Barrow explained that the design of the technical assistance project embeds training activities to strengthen the capacity of users of the securities market surveillance system, and the preparation of relevant operational manuals and workflow processing and document management for the surveillance solution.

He said the Bank’s support for the project derives from the federal government’s efforts to promote the development of a competitive, deep and liquid capital market supported by an enabling regulatory environment that can efficiently mobilize resources from Nigeria’s fast-growing institutional investor base, the private sector and international capital to finance sovereign and corporate investment programs.

According to him, “The technical assistance support builds on the SEC’s initiatives to strengthen the supervisory and regulatory framework as well as enhance market integrity and transparency under the Nigeria Capital Markets Development Master Plan 2015-2025, with a view to positioning Nigeria as an attractive destination for portfolio investments.

“It also aligns well with the Bank’s Country Strategy Paper for Nigeria 2020-2024 which recognizes the importance of a sound, well-regulated, resilient, effectively functioning and globally competitive financial markets in Nigeria for sustainable growth and development.”

Barrow said at a time when economies are buffeted by global shocks, improving the attractiveness of capital markets to domestic and portfolio international investors is imperative for greater resource mobilization and building resilience to sustain Africa’s economic recovery.

Expressing desire to see growth of the equity market well beyond the current N28.16trillion underpinned by continued growth of the corporate bond market in Nigeria, he spoke of how the COVID-19 pandemic has reinforced global risk aversion, prompting international investors to move their portfolios into safer assets and havens.

In his remarks, Lamido Yuguda, Director General of the Securities and Exchange Commission, commended the AfDB support which will enable the commission to execute very important projects, particularly the one relating to the acquisition of a surveillance solution.

Yuguda said a market surveillance system is required to aid the regulator in detecting and addressing market abuse as quickly and efficiently as possible and to proactively prevent major infractions.

“An automated market surveillance tool will enhance the Commission’s role in investor protection, as well as ensure a transparent, fair and orderly market and reduce systemic risk,” the SEC Boss stressed.

“With the successful acquisition of a surveillance solution for the Commission, the SEC expects the following outcomes: The curtailment of market infractions; a modernised and technology-driven regulatory approach which enhances the protection of investors; Enhanced investor confidence leading to the increased participation of domestic investors -both institutional and retail – in the capital market.

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He said the solution will also help drive economic growth through the capital market’s role in the efficient intermediation and allocation of capital to the real economy to create jobs, encourage savings, facilitate wealth creation as well as increase investment in the economy through both Foreign Direct Investments and domestic investor participation.

Yuguda disclosed that the SEC is currently implementing a comprehensive market and institutional reform program intended to reposition the Nigerian capital market to be globally competitive and attractive for investment activities in Africa. The ten-year Capital Market Master Plan (2015-2025) sets the vision, objectives and initiatives required to achieve this goal.

The Commission he said, has recorded significant successes in achieving some key Master Plan objectives such as full Dematerialization of Share Certificates, recapitalization of Capital Market Operators, the launch of the National Investor Protection Fund, and a new Corporate Governance Scorecard for public companies, and Electronic Dividend Mandate Management System, amongst others.

“The SEC is at a critical halfway point in the implementation of the Capital market Master Plan where the deployment of market surveillance infrastructure has become exceedingly necessary. In addition, the SEC is focusing on capacity development as a catalyst to drive the actualization of other strategic initiatives in the Plan.

Realizing these focus areas align closely with AfDB’s “High 5s” priority sectors for the economic transformation of Africa, he said, noting that the Commission leveraged its strong partnership with AfDB to drive some of these key initiatives to strengthen internal and issuer capacity.

“We believe that your support and our collaboration underscore the Commission’s and the Bank’s mutual goal to grow the capital market and create viable avenues for sustainable economic growth for Nigeria and the region.”

He pledged SEC’s commitment to discharge the terms of the agreement and looked forward to the timely and successful execution of the critical project, leveraging AfDB’s support.

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