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There is strong correlation between economic growth and capital markets – Popoola

Temi Popoola, CFA, is the chief executive officer of the Nigerian Exchange Limited. In this interview with Opeyemi Kalejaiye, Popoola speaks to how the NGX is engaging key stakeholders ahead of the Nigerian Capital Market conference. Excerpts:

How would you describe the role of the NGX in promoting financial inclusion and empowerment for Nigerians?

The Exchange’s longstanding commitment to promoting financial literacy is demonstrated through the hosting of its flagship youth-focused financial literacy and inclusion programme, which has impacted over 67,000 young people in more than 12,000 schools across Nigeria since 2000.

NGX also hosts the X-Tours programme which provides experiential opportunities for students by exposing them to a ‘live’ view of what happens at a securities exchange through a field trip to any of the Exchange’s trading floors across the country as well as interactive sessions on financial education topics.

In 2019, The Exchange strengthened its resolve to promote financial inclusion in the Nigerian capital market by publishing the maiden edition of StockTown, a comic book aimed at promoting financial literacy in Nigeria. Now with a second edition, StockTown is available in both print and digital formats.

As part of efforts to boost capital market literacy, The Exchange’s dedicated learning hub offers bespoke capital market training programmes to empower individuals and businesses to create value, strengthen financial literacy and enhance investment in the capital market.

X-Academy’s training programmes are built around six broad themes, which include: Listings and Trading, NGX Products, Market Data and Technology, Financial Education, Corporate Governance, and Risk Management and Compliance, and feed directly into the National Financial Inclusion Strategy (NFIS).

NGX has played a leading role in developing financial instruments that advance financial inclusion in the Nigerian capital market such as the Federal Government of Nigeria (FGN) Ijarah Sukuk and FGN Savings Bonds.

These instruments were designed and targeted at retail investors to provide opportunities to all citizens irrespective of income level to contribute to national development while enabling all citizens to participate in and benefit from the favourable returns available in the capital market. Both instruments were designed with financial inclusion in mind, offering low entry points to ensure participation from low-income earners.

How would you describe the capital market in Nigeria and how does the flagship NGX Capital Market conference support the advancement of the market?

The capital market in Nigeria has been instrumental in driving some of the economic growth witnessed in Nigeria over the past decade but remains largely untapped as an avenue to resolve some of the pressing challenges facing us collectively whether as government or as citizens.

Just like other capital markets in developing economies around the world, the Nigerian capital markets have had a torrid history driven in part by the boom and bust cycles of Africa rising related flows of foreign capital to home-grown challenges relating to the macro-economic cycles of the past few years.

Notwithstanding, the market has, for the past several decades, remained the most effective mechanism for Nigerian entrepreneurs and businesses to raise medium and long-term capital. Also, taking into cognizance, the fact that the capital market plays a critical role in the economy, through the efficient reorientation of financial resources to economic activities for sustainable growth and development.

With the flagship NGX capital markets conference, we want to highlight the remarkable opportunity that the capital market offers in driving government and private sector agenda and to examine the current state of the Nigerian capital market.

Nigerian Exchange Limited, being the champion of innovation and transformation within the Nigerian capital market will be looking to leverage on our rich heritage to bring the right mix of policymakers, regulators, business leaders and capital market operators to examine this theme.

Read also: NGX hosts 9th Nigerian capital market information security forum

What are your key objectives for this conference?

Empirical studies have demonstrated that there is a strong correlation between economic growth and the strength of the capital market. Nigeria, just like other economies is presently charting a path back to normality and sustainable recovery from the Covid-19 pandemic.

Knowing that this is a pivotal moment, we have asked ourselves, how we can best support concerted efforts from the government and private sector to rebuild. Hence, there is no better time than now, to showcase the untapped potentials inherent in the capital markets for stimulating economic growth and prosperity. With the conference, we have the underlisted objectives on our radar to achieve.

Position the capital market to attract greater global flows for sustainable economic recovery. Showcase NGX as a champion of innovation and transformation in the capital market. Sustain policy advocacy, to endear a vibrant capital market. Present emerging technologies and digital innovations to deepen retail investment and domestic participation in the capital market.

What informed the decision for the theme? The Future Ready Capital Market: Innovating for Nigeria’s Sustainable Recovery?

A look at the trends driving the economy today shows a pattern of agility, nimbleness, and acceleration. With these trends, we are witnessing new innovations such as remote education, telemedicine, remote trading and the amplication of financial technology services across the financial markets.

Consequentially, capital market participants now broadly recognize the need to build resilience as they saddle through the current economic realities. The conference theme encapsulates the progressive pace of change and the disruptive prospects that it presents, as we collectively forge ahead with Nigeria’s sustainable recovery agenda.

The theme is also premised on the various transformational initiatives we are driving at the Exchange towards the creation of a well-developed capital market ecosystem that will play an even bigger role in the deployment of long-term sustainable capital into critical sectors in the country such as infrastructure, housing, agriculture, and SMEs.

Who are the stakeholders attending the conference and what is the impact on them?

The flagship edition of the NGX capital markets conference will have in attendance, policy experts, business leaders, investors, international development partners, industry regulators, amongst other leading stakeholders from the public and private sectors, to share their insights and engage in insightful deliberations, that will usher the markets and our nation into a new era of growth and recovery.

The conference will be hosted as a hybrid event, with over 2,000 participants expected to attend and participate globally. Let me use this opportunity to appreciate the support we have received from the public and private sectors, beginning with the acceptance of the vice president H.E, Prof. Yemi Osinbajo SAN, GCON to headline the conference as Keynote Speaker and other invitees for their confirmation of participation.

What is the role of NGX in building a resilient economy for Nigeria?

The Exchange serves as a fundamental channel through which growth in critical sectors of the economy is facilitated, to foster development. Let me share with you a few of the ways in which we support the building of a resilient Nigerian economy

The federal and state governments raise funds to finance its activities leveraging NGX as a fundamental channel of distribution. Through this, we are supporting infrastructure development, creation of employment and generating more revenue for the government. NGX also provides a platform to raise equity and capital that has strong socio-economic benefits through the development of roads, transportation, housing, energy, telecommunications, public transport, etc. This, in turn, improves the competitiveness of domestic industries and enhance their ability to compete globally, given the current momentum towards global integration.

NGX promotes public-private sector partnerships to encourage the participation of the private sector in productive investments. The need to shift economic development from the public to the private sector to enhance economic productivity has become inevitable as resources continue to diminish. It assists the public sector to close the resource gap and complement its effort in financing essential socio-economic development, through raising long-term project-based capital. It also attracts foreign portfolio investors who are critical in supplementing the domestic savings levels. It facilitates inflows of foreign financial resources into the domestic economy.

Let me also say that NGX plays a vital for inclusive growth in terms of wealth distribution and making capital safer for investors, through our various policy advocacy initiatives to improve investor confidence. We also support the financial inclusion drive by introducing new products and services tailored to suit investors’ preferences for risk. In summary, we play the role of an enabler supporting the various growth opportunities with our innovative capital market products and services.

Are there policies the government can implement to support the NGX towards building a more robust, capital market?

The government has done a lot in supporting the NGX and the capital market and we are appreciative of this. For instance, the finance bill that was passed recently has helped to strengthen capital market operations. Also, regulatory pronouncements from the SEC have been impactful within the capital markets, by creating regulation for product innovations, like derivatives, alternative financing, ETFs, etc, all with the sole aim of creating a multi-asset Exchange for Nigerians.

Also considering the demutualisation of the NGX, it would not have been possible without the support and policy direction from the government and SEC. So, in this regard, the government has done a lot, however, a lot more can be done around incentivising more corporates to be active participants in the capital market. Incentives could be around corporates listing or long-term corporate funding in the capital market.

Additionally, to build a robust capital market, the government can initiate policies and regulations to encourage local capital formation for the burgeoning Fintech industry, in collaboration with all the stakeholders in the ecosystem. We would also welcome and support comprehensive reforms that address the underlying drivers of imbalances, particularly, towards reducing fiscal deficits and reforming FX market architecture with a framework that is consistent with long-run economic aspirations.

How is the NGX leveraging innovation and technology for investors in the capital market?

Digital transformation has always been an important component of our corporate strategy and a demonstration of our digital resilience was shown with the activation of the Exchange’s Business Continuity Plan in March 2020, following the outbreak of COVID-19 in Nigeria. Our continuous investments in technology facilitated the immediate transition to working from home and remote trading to help the nation stem the rising negative impact of COVID-19.

We provided brokers with access to the requisite platforms to trade remotely and seamlessly including FIX Protocol, X-NET and Virtual Private Network (VPN), with no downtime, subsequently, impacting investor optimism and pushing the NGX to emerge as one of the best-performing markets in the world with a year return of +50.03%.

Tell us how the NGX provides safe reliable returns to investors?

One of the core tenets of an effective capital market is the need for regulation and enforcement of rules as well as a mechanism to ensure that investors are protected in the event of pecuniary losses as a result of intermediaries not fulfilling their obligations.

This has informed our new corporate structure, following our demutualization. The NSE transitioned to Nigerian Exchange Group Plc with three wholly-owned subsidiaries which include Nigerian Exchange Limited (NGX), NGX Regulation Limited (NGX RegCo), and the NGX Real Estate Limited (NGX RelCo). NGX is the operating exchange, tasked with all commercial activities of the exchange, which include listing, trading and ancillary services.

NGX RegCo is an independent company that performs most of the regulatory activities of the exchange through a regulatory services agreement. NGX RelCo is a real estate company set up to deliver tailored property letting, real estate investment and facility management services.

We took this approach to fully commercialise the functions of the exchange as a corporate entity and differentiate the regulatory function to prevent conflicts of interest. This ensures that NGX can focus on exploring new opportunities, leveraging strategic partnerships, and transacting business to deliver profit for wealth maximization for investors. We are also contributing to policy formulation and advocacy to ensure that there is an enabling environment to raise liquidity and support capital formation for businesses.

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