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‘Market still has opportunities for growth in product offerings, sectors participation’

‘Market still has opportunities for growth in product offerings, sectors participation’

Abiodun Adeniran is the Managing Director, Vetiva Securities Limited. He speaks on the company’s strategies, investors, capital market and Nigerian economy, writes Iheanyi Nwachukwu. Excerpts

Can you share the specific strategies Vetiva is implementing to boost investor confidence in the Nigerian capital market? How does Vetiva plan to address the evolving needs of both institutional and retail investors to foster trust and participation in the market?

Let me begin by emphasising that building robust investor confidence is crucial for maintaining the stability and integrity of capital markets all over the world.

It’s also good to note that the Nigerian capital market is a vital component of the country’s financial ecosystem, providing a platform for companies to raise capital and investors to grow wealth; and investors’ willingness to participate actively in these markets is the foundation for economic growth and development.

As a practitioner in the Nigeria capital market for almost two decades, it suffices to know that investors’ confidence revolves around three major activities: market liquidity, capital formation, and financial stability. Specifically, investor confidence enables active trading, ensuring market liquidity and efficient price discovery – market liquidity.

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With confidence, investors are more willing to provide capital to companies, facilitating investment and economic expansion – capital formation. Finally, robust investor confidence contributes to the overall stability and resilience of the financial system – financial stability.

In Vetiva, there are numbers of specific strategies (both within and without) being deployed in boosting investors’ confidence… let me highlight some:

Investor education – We intentionally launched series of targeted campaigns to improve financial literacy and awareness among the public to facilitate interest in capital market investment (audio & visual analysis, meetings, and webinars).

Diversification – As one of the leading CMO in Nigeria, we facilitate and developed new financial instruments (Exchange Traded Funds) across sectors to provide investors with wider range of options.

Transparency and disclosure – One of our standard rules is to ensure that listed companies (within our research coverage) provide timely, accurate, and comprehensive financial information to the public, which is crucial for investors to make informed decisions.

Corporate Governance – We equally recognise the fact that effective corporate governance practices, including strong leadership and risk management, instil investor trust and confidence.

Regulatory Oversight – Vetiva is an advocate of robust regulatory frameworks and investor protection measures to safeguard the interests of market participants.

Conclusively, the interest and needs of both institutional and retail clients have been adequately addressed with our target financial literacy programmes; outreach and collaboration with friendly stakeholders; and expanded digital platforms which aims to provide accessible, interactive, and engaging investment awareness and education content to our existing and potential clients.

Do you think investors have enough offerings in terms of investment securities available to adequately diversify their risk, vis-a-vis what is available in other developing markets?

There is no gainsaying that the Nigerian capital market is a developing market, hence the depth is not as pronounced as other developed economies.

The market is dominated by a few sectors, limiting the range of investment options for investors. However, the market has made tremendous efforts over the years in attracting other sectors to the market, (ICT, Energy & Power) which is evidenced.

The hybrid products such as ETFs, REITs are equally pulling their weight along with the existing equities and bonds. Also, efforts are ongoing in the development of alternative offerings in derivatives, which the frameworks and the necessary institutions are already in place.

Vetiva for instance, is making another bold effort by looking into other alternative investment opportunities in Arts and other collectors’ items that will satisfy the needs of some target investors.

To be precise, the market still has opportunities for growth in terms of product offerings and sectors participation, but the existing instrument offerings are sufficient to achieve well diversified and balanced portfolios.

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Given the prevalent economic landscape that is encouraging an increase in the delisting of companies, we have seen a lot of mergers and acquisitions, how do you think the regulatory authorities can protect shareholders?

The regulators have the sole responsibility of implementing robust regulations and enforcement mechanisms to protect investors and enhance market integrity. The challenges of aligning management’s interests with those of shareholders to foster a sense of shared purpose is within the purview of the regulatory authorities.

To adequately protect the shareholders, the regulatory authorities must adopt the following measures amongst others: Strengthening regulations – implementing stricter rules and guidelines to mitigate market manipulation, insider trading, and other unethical practices.

Enhancing enforcement – empowering regulatory bodies to effectively monitor and penalize non-compliant market participants. Investor redress – ensure accessible and efficient mechanisms for investors to seek remedies for grievances and build trust.

Investor compensation – establishing adequate investor compensation schemes to provide a safety-net for individuals and institutions that suffer losses due to market failures or fraudulent activities.

Continuous improvement – regularly reviewing and enhancing policies and practices to address evolving market dynamics is also crucial.

We have seen recent efforts by the CBN to clear FX backlogs and reduce pressure on the Naira, how are foreign investors reacting to this? Have we seen more participation? Also, why is having this set of investors important in the capital market?

The world is now a global village – so famous a cliche, but the truth! In all honesty, increased investor participation both domestic and foreign is essential for the continued expansion and diversification of the Nigerian capital market.

FPI and FDI are rooted through the capital market on the back of monetary authorities’ understanding that repatriation of such investment on maturity will not pose any challenge. Hence, the transparency, stability, and consistency in FX policies of any nation is an incentive for FPI and FDI. The clearing of FX backlog by CBN is good news to the market, which attracts an equally positive response for foreign investors participation. It’s a confidence booster for FPI and FDI.

In what ways can the Nigerian government and regulatory authorities collaborate with industry stakeholders to develop investor education programmes aimed at increasing financial literacy and awareness of capital market opportunities?

It is a necessity for all stakeholders – policymakers, regulators, listed companies, market operators, and the investing public to collaborate and contribute to the transformation of the Nigerian capital market, thereby unlocking its full potential and driving sustainable economic prosperity!

The investor education and awareness programs can come in different forms, amongst which are:

Financial literacy programmes – by developing comprehensive educational initiatives to improve the public’s understanding of investment concepts and financial products.

Outreach and collaboration – by partnering with educational institutions, community organisations, and the media to reach a wider audience and promote investment awareness.

Digital platforms – by leveraging online and mobile technologies to provide accessible, interactive, and engaging investment education content.

Confidence building – by ensuring cooperation among regulators, issuers, and market operators to build enough confidence that is essential for creating a trustworthy capital market ecosystem.

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The Securities and Exchange Commission (SEC) embarked on lofty initiatives which has improved investor participation in the capital market over time. Such initiatives include, but not limited to: • Investors understanding of the basics of the Nigerian capital market, market products, market opportunities, and market practices.

• Facilitating short video clips to engender awareness on dematerialisation, direct cash settlement, wonder banks or Ponzi schemes, savings, investing, mutual funds and diversification.

• Sponsored movies and film productions to ensure that financial inclusion issues and awareness are widely publicized to all stakeholders (Mutual Benefits, Easy Money, Breeze etc).

• Oversee the development of interest in capital market studies amongst students of all ages by organising targeted quiz and other competitions among schools (Primary, Secondary and Tertiary).

• Set up the Financial Literacy Technical Committee (FLTC) to provide market-related and people-centric information to increase the level of financial literacy nationwide.

Considering the growing importance of environmental, social, and governance (ESG) factors in investment decisions, how can the industry players draw more investors into the market?

The ESG factors are gradually taking root in investment considerations not only in the developed countries, but also in most developing countries in view of global focus on climate change, human rights, and adherence to rule of laws.

It is becoming a deal for listed companies to go beyond absolute profitability to attract knowledgeable, sophisticated, and institutional investors, but to fully disclose the impact of their operations on the environment; the impact on staffs, customers, and immediate community; and the level of transparency and integrity involved in its governance.

Sophisticated investors are willing to participate and invest more when there is visible evidence in terms of disclosures and ratings, noting the balance amongst the people, planet, and profit orientation of the company. Essentially, all listed companies are expected to imbibe the ESG concepts to attract more investors.