In recognition of the role of the Capital Market as most critical to the kind of economy the present administration intends to develop for Nigeria, the Federal Government said it will set up a $25 billion fund wholly dedicated to infrastructure investments.
Kemi Adeosun, Minister of Finance stated this during the inauguration of the Capital Market Master Plan Implementation Council (CAMMIC), National Investor Protection Fund (NIPF), and the launch of the Corporate Governance Scorecard for quoted companies by the Securities and Exchange Commission (SEC) in Lagos Thursday.
According to Adeosun, “In the current environment of significant revenue squeeze and other budgetary constraints, these investments will clearly not come from government coffers alone. We believe this is where the capital market can really make itself relevant by stepping in to close the funding gap. Government is already looking to set up a $25 billion fund wholly dedicated to infrastructure investments. A crucial assignment we have for the capital market community is to come up with other innovative ways of mobilizing the capital needed to address Nigeria’s infrastructure challenge”.
The Minister, represented by the Permanent Secretary Ministry of Finance, Dr. Mahmoud Isa-Dutse, said an efficient and vibrant capital markets are an indispensable feature of any modern economy supplying affordable medium-to-long term capital needed for growth as they facilitate mobilization of savings, accelerate capital formation, provide investment avenues and enhance efficient allocation of capital to growth sectors as no country has been able to develop without a thriving capital market.
“Nigeria needs and deserves a capital market that is characterized by high levels of liquidity, depth, breadth and sophistication to enable rapid socio-economic development. Going through the Master Plan, it is heartwarming to note that this is the type of capital market you envision for our country and indeed we desperately need such a market to emerge in order to tackle Nigeria’s biggest challenges of huge infrastructure deficit and unacceptable level of unemployment. As you all know, to grow our economy, we require significant funds to modernize our critical infrastructure.
She expressed worry that currently less than 3% of Nigerians invest in the capital market and even more worrisome, only 0.2% of Nigerians invest in mutual funds.
“Imagine the kind of savings to be mobilized, the liquidity to be injected and the sophistication to be developed if we improve these numbers by bringing millions more Nigerians to invest in the capital market. For Nigerians of faith and people who prefer ethical investments, we must deepen the non-interest product space so they can be involved in wealth creation opportunities the capital market offers.
“For a country and economy of our size, there is no reason why we should not be able to actualize the targets and aspirations we have set for ourselves within the Master Plan. Indeed, with diligent implementation, we shall emerge as “Africa’s most modern, efficient and internationally competitive capital market that catalyzes Nigeria’s emergence as a top 20 global economy.
“With a detailed master plan we get to reap the benefits of strategic thinking, policy consistency, greater coordination, and hopefully better results. As we inaugurate the Council who will lead advocacy for the Capital Market Master Plan, I urge everyone here to see this as the important National assignment it represents”, she said.
She assured that as the Minister in charge of supervising the capital market, She would support the SEC Nigeria to ensure that this project is successful and where necessary is willing to add the weight of her voice to facilitate achievement of key initiatives within the Master Plan.
Speaking earlier, Director General of SEC, Mounir Gwarzo said the SEC’s enabling law, Investments and Securities Act (ISA) 2007, in foresight requires the SEC to set up a national investor compensation scheme. Specifically, Section 13(k) of the Investment and Securities Act 2007, enjoins the Commission to act in the public interest having regard to the protection of investors and the maintenance of fair and orderly markets, and to this end establish a nationwide trust scheme to compensate investors whose losses are not covered under the Investors Protection Funds administered by Securities Exchanges and Capital Trade Points”.
Gwarzo said the 10-year Nigerian capital market Master Plan, which has become SEC’s guiding document, considers the investor protection fund as a critical ingredient for restoring and sustaining investor confidence. It therefore firmly recommended the urgent establishment of the fund. Since the new Management at SEC assumed duty, the NIPF and other capital market initiatives have received priority attention.
The SEC the DG said, has played its part and will continue to take its investor protection mandates with all seriousness adding, “We have provided the take-off grant for the initial operation of this Fund. Going forward however, the entire capital market community should come together to discuss details of how we can all contribute to continued funding for this critical market vehicle”.
The DG disclosed that as this year draws to a close, the Commission has identified key initiatives within the Master Plan that will receive priority attention next year some of which include Unified Licensing, Reduction in Transaction Cost, focus on SMEs, Regulatory Framework for Crowdfunding, Easing Listing Requirements for SMEs, Introducing Fiscal Incentives for SMEs to access the market and demutualisation of NSE.
Also in his remarks, Former Minister of Finance and immediate Past Minister of National Planning, Dr. Shamsuddeen Usman said “Ideally an investor would be able to get his investment back in case of bankruptcy, however, the process is usually very lengthy and fraught with uncertainties. NIPF must strive for a process that is robust and fast to add any real value. The NIPF must, in a way, be able to ‘short-circuit’ the bankruptcy process. The NIPF provides a compensation of up to N200,000 for now. Like deposit insurance does for depositors, it should help provide a minimal ‘safety net’ for investors.
Usman advised that Nigeria should aspire to a level where retail investors invest majorly in collective investment schemes managed by fund managers, who along with pension funds, insurance companies and banks are better at monitoring the governance landscape as he said this will lead to better fund safety and will enhance investor protection in the long run.