AfDB, SEC Sign $978,000 Capital Market Surveillance Project

As part of efforts to modernise Nigeria’s capital market and ensure that it is well positioned to support economic transformation driven by private sector investment, African Development Bank (AfDB) Group and the Securities and Exchange Commission (SEC) have entered into a pact for the acquisition, installation and deployment of a real-time automated securities market surveillance system in the Nigerian capital markets.

The deal has total value of $978,000. The AfDB will contribute $460,000, while SEC provides a counterpart funding of $518,000. The $460,000 grant is to finance technical assistance and capacity building for capital markets development under the Nigeria Securities Market Surveillance System project.

The introduction of a surveillance system is expected to enhance oversight over securities trading across all existing and future trading platforms and all tradable securities and products by SEC.

Speaking at the signing of the agreement yesterday in Abuja, AfDB director-general, Nigeria country office, Lamin Barrow said the project will preserve securities market integrity, boost investor confidence and enhance financial inclusion, among other expected outcomes.

The grant is from the Capital Markets Development Trust Fund (CMDTF) – a multi-donor trust fund administered by the African Development Bank-and supported by the Ministry of Finance of Luxembourg and the Ministry of Foreign Trade and Cooperation of the Netherlands.

Barrow said the bank’s support for the project is premised on federal government’s efforts to promote development of a competitive, deep and liquid capital market supported by an enabling regulatory environment that can efficiently mobilise resources from Nigeria’s fast growing institutional investor base, the private sector and international capital to finance sovereign and corporate investment programmes.

He also disclosed that in Nigeria, the Bank Group has a robust portfolio in the financial sector, with a total commitment value of $1.32 billion, “which represents 30 per cent of our portfolio.” He said the bulk of the interventions are in the form of Lines of Credit to financial institutions, including a $10 million financing package for Infrastructure Credit Guarantee Company Limited (InfraCredit) geared to support development of the corporate bond market, particularly for infrastructure development and to mitigate currency risks.

He said the bank is also supporting the Nigeria Infrastructure Debt Fund through a $10 million facility that provides long-term local currency debt financing with objective to crowd-in local pension funds and other institutional investors for infrastructure development in Nigeria.

AfDB expects the intervention to complement the Bank’s support under its “Risk Based supervision Framework and Capacity Building Project” currently under implementation by SEC; aimed at enhancing risk-based supervisory framework for the capital markets.

The AfDB DG said to ensure sound implementation and sustainability, the design of the technical assistance project embeds training activities to strengthen the capacity of users of the securities market surveillance system, and the preparation of relevant operational manuals and workflow processing and document management for the surveillance solution.

The technical assistance support builds on the SEC’s initiatives to strengthen the supervisory and regulatory framework as well as enhance market integrity and transparency under the Nigeria Capital Markets Development Master Plan 2015-2025, with a view to position Nigeria as an attractive destination for portfolio investments.

In his remarks, Director-general of SEC, Mr Lamido Yuguda said the commission is very pleased and thankful to AfDB for providing the grant support to execute these very important projects, particularly the project to acquire a surveillance solution.

Yuguda said a market surveillance system is required to aid the regulator in detecting and addressing market abuse as quickly and efficiently as possible and to proactively prevent major infractions. An automated market surveillance tool will enhance the Commission’s role in investor protection, as well as ensure a transparent, fair and orderly market and reduce systemic risk.

The SEC DG said the successful acquisition of a surveillance solution for the commission will aid the curtailment of market infractions, modernization and technology driven regulatory approach that enhances the protection of investors and enhanced investor confidence leading to the increased participation of domestic investors (both institutional and retail) in the capital market.

He said the Surveillance solution would also aid an increased impact on GDP through the capital market’s role in the efficient intermediation and allocation of capital to the real economy to create jobs, encourage savings and facilitate wealth creation as well as Increased investment in the economy through Foreign Direct Investments and growth in the rate of domestic investor participation in our markets.

Yuguda disclosed that the SEC is currently implementing a comprehensive market and institutional reform program intended to reposition the Nigerian capital market to be globally competitive and an attractive destination for investment activities in Africa.  The ten-year master plan sets the vision, objectives and initiatives required to achieve the goal.