• Thursday, March 28, 2024
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BusinessDay

What Chaka’s licence means for Nigerian investors

Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) has taken a step towards deepening the inclusion of financial technology (fintech) firms in the capital market by issuing a licence to Chaka Technologies, a platform that provides investment opportunities in local and foreign stocks.

The development ushers in a new era of democratising the capital market and deploying investment for new and existing Nigerian investors using their mobile devices.

“I have held off recommending local apps to trade local and foreign stocks and bonds from Nigeria,” Kalu Aja, a personal finance and investment expert tweeted on the news of Chaka’s licence. “Glad to see Chaka has been given a digital sub-broker licence by SEC.”

The licence titled Digital Sub-Broker/Sub-Broker Serving Multiple Brokers through a digital platform is the first fintech licence to be issued by the SEC whose aim is now on increasing the number of Nigerians that are financially included and are investing in the Nigeria capital market. It is highly unlikely to be the last one, as it is expected that more digital investing apps would be granted licence in the coming months.

Ike Williams, Resident Advisor Digital Transformation at SEC alluded to this at a webinar organised by the Commission on Wednesday. According to him, the SEC had received several applications which are currently undergoing processing. Williams said the applications would get the required attention they deserve given that the Commission is sufficiently aware that the global investment climate has changed and it is has become imperative to ensure that every player is involved in expanding financial services to all Nigerians wherever they are located.

Read Also: Chaka receives SEC’s first digital sub-broker licence

It was also at the webinar themed ‘Digital Platforms: a new frontier for capital market inclusion’, that experts noted that the number of Nigerians that are financially excluded was already high before the COVID-19 pandemic struck, it has now grown from about 40 percent to 45 percent of the country’s population.

“We have a large list of those in the ecosystem. We are looking at areas of interoperability and many other things,” Williams said.

Chaka Technologies which made the announcement on Wednesday said the licence means that its operations remain within SEC’s purview as it accelerates its mission to enable individuals and businesses to invest in capital markets.

Before now, the Nigerian capital market has struggled to attract the younger generation, particularly the millennials mainly because the process of customer onboarding was too technical and mostly paper-driven. The returns on investment were also seen as not attractive particularly against a weakening naira.

Chaka’s licence opens the door to young Nigerians with new capital to invest in the market. The capital market in Nigeria, just like many others, is at a transitional period where it has the opportunity to adapt to digital trends and technologies as well as innovate with new business models and products and services.

“We want to make it easier for foreign investors to have access to Nigerian stocks and for Nigerians in the diaspora to evangelise the market making it possible for someone in Germany to wake up in the morning to trade stocks on the Nigerian stock exchange,” Osibodu said.

Before now, Chaka and other players providing digital investments were at odds with the commission which had on 17 December issued a directive restraining Chaka from advertising or offering for sale the shares, stock, and other securities

The SEC in its statement said the temporary restraining order was granted by the Investments and Securities Tribunal (IST) pursuant to an application by the Securities and Exchange Commission. The application brought by the commission’s solicitor, Chuka Agbu, alleged that Chaka and its partners were engaged in investment activities, including providing a platform for the purchase of shares in foreign companies such as Google, Amazon, and Alibaba. These activities, according to the commission, were being carried out outside the regulatory purview of the commission and without the requisite registration, as stipulated by the Investment and Securities Act 2007.

The commission later in April 2021 directed capital market operators to desist from supporting online investment trading platforms providing access to foreign securities in Nigeria. The commission said those securities were not registered in Nigeria, and platforms giving access to these were acting against the law.

“Only foreign securities listed on any exchange registered in Nigeria may be issued, sold, or offered for sale or subscription to the Nigerian public,” the SEC had said.

While the fintech ecosystem had criticised the decision of the commission, Chaka had told BusinessDay then that it was working with SEC to find a way forward. One of the steps was creating a new licence policy specifically for fintech companies to participate in the capital market.

“We are pleased to inform our stakeholders and the general public that Chaka has taken the necessary steps to register with the Securities and Exchange Commission (SEC) for a newly created licence, as SEC continues to maintain its avowed intention to encourage innovation within the market space,” Tosin Osibodu, CEO of Chaka said.

Having secured the licence, Chaka is now cleared to offer investors stocks on the Nigerian capital market and foreign securities.

Osibodu told stakeholders at the SEC webinar on Wednesday that the goal of the company is to democratise investments and to ensure that more Nigerian stocks are visible and accessible for foreign investors on the international capital market scene.