Nigeria Update: ‘How effective regulatory collaboration can boost market liquidity, growth’

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Capital market experts have called for optimum collaborations among the Nigerian capital market regulators to enthrone a regime of friendly operating environment, with growth in view.

The experts, who noted that regulatory activities must be in such that information and regulations can be disseminated across sectors to enable participants and operators have the benefit of knowledge.

They argued that a situation where Nigerian market operates in secret in the areas of regulation, is disincentive to growth objectives.

Specifically, the experts cited investment-banking segment, noting that there is the need for the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) to co-regulate the sector and guarantee improved liquidity and access to fund for operators in the sector.

Therefore, they suggested that the apex bank must declare support for capital market operators to create liability through the CBN window to fund their operations under a joint regulation with SEC.

The President of the Association of Issuing Houses of Nigeria, Sonnie Ayere, agreed that more effective collaborations between regulators would have a positive impact on the market.

“Today, so-called investment banking companies that operate across the sector, such as asset management, securities trading, issuing house and trustees, lack access to funding. In fact, under their securities trading business, which is a very important component of capital market, that area had no access whatsoever to funding. So, imagine a trader or stock broker or market maker that cannot find where he can borrow money from to buy a security. How does he trade? How does he create liquidity for himself?

“That is why if the foreign investors leave our market, the market goes depressed, because there is no ‘buy power’ and that is one of the biggest problem in capital market and we are trying to see how CBN can step in and help in supporting capital market operators within risk parameters, without putting any sort of increasing financial instability.

“One of the problems we had in the Nigerian market is that the Nigerian market is generally operated in silos and if we are able to break that silos, such that information and regulation can flow across regulators and enable participants and operators have the benefit of different regulators, investment banking sector would make a much-more desired operating environment for the market.

“Now, if SEC was to work with CBN, while operators that are under both of them can actually have access to liquidity, or be able to create liability, in the sense that they can now borrow to fund their operations, under the regulation of both SEC and CBN, it would make the impact of the investment banking much more significant than what it is today,” he said.

The Group Managing Director of Greenwich Securities, Kayode Falowo, added: “The market regulators have access to information in various areas they coordinate and there are interfaces between the rules that guide each area where they coordinate.

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