Why Osinbajo should chair council for capital market master plan
IT is no longer news that the Nigerian equities market, with a disappointing record of -18.84 per cent Year-to-Date return, was among the poor performing stock markets in the world last year. This partly explains the weak and non-inclusive real GDP growth witnessed in 2018. When the 10-year (2015–2025) Capital Market Master Plan (CMMP) was launched in November 2014, it was meant to harness the potentials of the market in catalyzing economic growth and development.
Consistent with the CMMP, the Securities and Exchange Commission has undertaken a raft of initiatives to enhance transparency and boost investors’ confidence notable among which are the establishment of a National Investors Protection Fund meant to cushion the adverse effect of losses suffered in the stock market and encourage domestic retail investors, the e-Dividend Mandate Management System (eDMMS) developed to minimize cases of unclaimed dividends by enabling direct payment of investors’ dividends into their nominated bank accounts and the Direct Cash Settlement scheme which ensures that investors receive their money directly whenever securities are sold.
Others include the Corporate Governance scorecard for companies listed on the Nigerian Stock Exchange designed to foster good governance practices by public companies as well as the recapitalization of capital market operators aimed at improving their baseline infrastructure and service delivery which has gone a long way in curbing sharp practices in the market. As a complement, the NSE has implemented minimum operating standards for market operators as well as launched the Premium Board which offers issuers the benefits of greater visibility and opportunities to raise capital. In addition, physical share certificates have been fully converted into electronic form in what is known as dematerialization of share certificates. Also, activities in the non-interest capital market space are beginning to gain traction especially with the introduction of sukuk. Furthermore, information obtained from the SEC website indicate that as part of efforts to boost capital market literacy, the Commission, in conjunction with the Nigerian Educational Research and Development Council (NERDC), is walking the talk concerning the inclusion of capital market studies in the curriculum of both Junior and Senior Secondary Schools in Nigeria.
Despite these giant strides, the journey to making the Nigerian capital market ‘one of the largest, most liquid, most diversified and most sophisticated emerging markets by 2025’ seems very far. The market is still shallow and concentrated and yet to be properly positioned to support Nigeria’s economic priorities. The flagship securities exchange, the NSE, is small compared to most emerging markets. Many of the systemically important corporations such as the International Oil and Telecom companies are not listed on the stock exchange and so it is easy to see why the market fails as a barometer for measuring economic performance. Moreover, the performance of the equities market remains tied to the apron-string of foreign investors who often dictate the pace of market activity. This has left the market vulnerable to external shocks. In fact, there is a consensus among market players that the dismal performance of the stock market in 2018 has a lot to do with the exit of foreign portfolio investors. Against the backdrop of its outstanding performance in 2017 when the return was in excess of 40 per cent, it is evident that volatility in the stock market is more pronounced in Nigeria than elsewhere in Africa.
Some major initiatives in the CMMP to create stability in the market, boost domestic participation and enhance its contribution to the nation’s economy include establishing a National Savings Strategy, reducing the tax burden for listed companies, promoting capital market participation in the listing of government-owned firms as well as granting incentives for companies in priority sectors to get listed. Others include establishing specialized funds to support critical economic sectors as well as incentivizing venture capital and private equity. All of these will entail proactive and sustained engagement with the Executive and the Legislature. In recognition of this therefore, the implementation architecture includes a Capital Market Master Plan Implementation Council (CAMMIC) currently led by Mr Tola Mobolurin, a seasoned professional who commands a lot of respect within and outside the capital market community. However, in view of the pivotal role of CAMMIC in fast tracking the implementation of the CMMP including through interfacing with senior government officials, it stands to reason that the Vice President, Professor Yemi Osinbajo, who heads the Economic Team, is better positioned to lead the CAMMIC.
In many jurisdictions with success stories in capital market plan execution, the implementation Council or Committee as the case may be is led by the Minister of Finance or the Prime Minister with membership drawn from very top government officials most of whom report to the President. A few examples will suffice. In Kenya, a high-level Committee (CMMP-SC) championing the implementation of the Capital Market Master Plan is chaired by the Cabinet Secretary National Treasury (the equivalent of a Finance Minister). Other members of the CMMP-SC include the Attorney General, Cabinet Secretary Agriculture, Cabinet Secretary Mining, the Governor of the Central Bank of Kenya, the CEO of the Capital Markets Authority among other top government officials. Sri Lanka shares a similar experience where the Capital Market Advisory Council is the key driver and is chaired by the Secretary to the Sri Lankan Treasury with the Governor of Sri Lanka Central Bank as a member. The case of Malaysia is quite instructive. The country developed and launched its first 10-year (2001–2010) capital market master plan in 2001. The plan was adopted as a national project with support from the highest levels of government. The Prime Minister championed its implementation. Not surprisingly, market size nearly tripled from US$186 billion in 2000 to US$517 billion by 2010. The success of the plan paved way for the launch of a second master plan currently being implemented till 2020.
Back home, ownership of the CMMP at the highest level will equally pay off. To this end, the 12-member CAMMIC which comprises the DG SEC, Deputy Governor (financial System Stability) of CBN, DG PENCOM, CEO of the NSE, Chairmen of the capital market committees of both chambers of the National Assembly and some other distinguished Nigerians should be expanded to include the Ministers of Finance, Justice, Budget & National Planning, Industry, Trade & Investment and Education. By so doing, it is easier to obtain the buy-in of the Federal Executive Council.
That said, a key priority in forging ahead should be to include CMMP as an integral part of the government’s economic recovery and growth agenda especially given the fact that the capital market received no mention in the ERGP. It bears repeating that the successful implementation of the CMMP hinges on support from the government hence the need to have somebody operating at the highest level as head of CAMMIC. To this end, Prof Yemi Osinbajo, the Chairman of the National Economic Council and who has been successfully piloting the Presidential Enabling Business Environment Council, should also be saddled with the responsibility of championing advocacy for major initiatives contained in the capital market master plan.
- Uwaleke of Nasarawa State University Keffi is Nigeria’s first Professor of Capital Market and the President of the Association of Capital Market Academics of Nigeria.