The Securities and Exchange Commission (SEC) has expressed its determination to raise the participation of retail investors in the Nigerian Capital market as part of the critical ways of deepening the market.
Mounir Gwarzo, Director General, SEC, stated this when the Management of the Commission visited the Federal Radio Corporation of Nigeria (FRCN) on an advocacy visit on the 10 year Capital Market Master Plan.
Gwarzo stressed that the dominance of the market by foreign investors is one of the reasons why the market is not as deep as it ought to be.
He said, “Our intention is to ensure that we raise the level of participation of retail investors in the Market that is the only way we can maintain the strength of the market. Dominance of the market by foreign investor is one of the reasons why our market is the way it is. Although it is the pattern of the market, but this dominance is a major factor because they are the ones that come in and come out. We need to upscale the participation of the retail investors in the market and that is why we are addressing some of their concerns.
Anyone you meet today and tell him to come back, the issue of unclaimed dividends is always a major problem
In order to achieve this, the DG disclosed that the Commission has embarked on various initiatives like recapitalisation, e-dividend registration, the Direct Cash Settlement as a direct benefit to investors from the e-dividend registration as when they register for e-dividend, anytime their shares are sold, they would get the proceeds directly in their bank accounts among others.
“We are urging Nigerians to go and register to get their dividends electronically. Once we get through with the e-dividend thing, we will be able to deal with other issues in the market. The entire market has commenced Direct Cash Settlement. The era when shares will be sold and the proceeds will be given to the broker who will them pay the client is over. What is obtainable now is that once the shares of an individual are sold, the proceed is paid directly into his band account. With this once the client has authorized the broker and provided all his details, the proceeds will be paid into the client’s account.
Gwarzo said that every year the Commission comes up with various initiatives from the Master Plan and have been implementing them adding “all the initiatives we came up with last year we have implemented them. This year we also came up with certain initiatives and one of them is the need for all arms of government to buy into the Capital Market Master Plan. It is only in Nigeria that we have not been given the kind of attention that the capital market deserves. The capital market is the one that defines the state of the economy.
He expressed the need for some laws to be amended in order to grow the capital market.
According to him, “For instance there is a provision in CAMA that states that once dividend is declared, after 12 years if it is not claimed it become statue barred meaning an investor cannot claim his dividend. We don’t think that is right, the international best practice is that dividend must be in perpetuity.
“Once you can supply evidence that it is yours, that person should be able to claim it. The lacuna is a provision of the law and we are partnering with the parliament to see that such laws are amended and we had an excellent collaboration with them”.
The DG further expressed the hope that incentives will be provided so that companies doing business in Nigeria are encouraged to list on the exchange.
“We think companies should be listed on our exchange. We are not advocating that it should be mandatory, but we feel the companies should be given some incentives for them to list. We don’t think it is right for foreign companies to be listed in their home countries and then come here and spend five, ten years and not be listed. Getting more companies listed will make the marker deeper and these are some of the initiatives we are pursuing this year” he added.
In his remarks, Director General of FRCN, Dr. Mansur Liman said the primary mandate of the organization is to inform, educate and entertain adding that it is a responsibility bestowed on the organisation to educate the Nigerian public on what the SEC is doing.
Liman expressed his happiness with the initiative and assured the SEC of the necessary co-operation and support to reach the grassroots.
“E-dividend is very important because it is the norm in developed countries and I think it will help to restore the confidence e of the local investor. When people invest and they are able to get their dividend and on time it is a way of restoring their confidence.
“The international investors comes in to make money and when there is any shock, they simply withdraw and their withdrawal creates a lot of problems in the market and it takes a long time again for it to recover.
“This is very good as ultimately the sustainability of the market depends on the local investor and not on the foreign investor. When the local investor invests and he knows it is not for making quick money but for long term that is when the market will be sustained”. He added.