Leveraging technology will ensure a more efficient capital market in the country. Chris Ugwu writes
With a weak market depth and developing market structure, it becomes apparent to explore ways by which the structure of the capital market can be revamped to position it for development
That is why all over the world, stock markets are using opportunities offered by technological revolution to transform to transform the markets activities.
Even with the widespread of COVID-19, which had led to social distancing and to a large extent, lockdown of economies in most part of the world, organisations are fast taping opportunities offered by fintech to remain afloat in business transactions.
In Nigerian market like any other developing nation, digitisation of activities and transactions has helped to boost market depth, investor participation and seamless operations. Most of the exchanges such as the Nigerian Stock Exchange,
FMDQ, NASD and the new Commodities Exchanges have all activated their remote business plan and are currently trading remotely to help fight the COVID-19 scourge. As digital revolution has become a tool for pooling retail savings, regulators and market stakeholders believe that tapping on the opportunities to pool investments from both local and foreign investors have helped to boost investor participation and reduce transaction costs.
This according them contributed to increased domestic investors participation as the country sustained the lockdown on the economy.
Following the positive impact the revolution is making on the economies, the Securities and Exchange Commission (SEC) last week said it intended to automate its processes in a bid to conform to current technological trends. Need for technological revolution
The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said that the NSE ews working on using the opportunities offered by digital revolution to transform the nation’s capital market.
He said the aim was to open more access to the market for millions of Nigerians as well as avail more efficiencies and profits by way of product development and services etc.
Onyema, who spoke on the occasion of the 4th edition of the yearly CEO Roundtable, which held recently at the NSE head office in Lagos, said ”to capitalize on the opportunities presented by the Fourth Industrial Revolution, the exchange is investigating the market potential of key emerging technologies.
“In order to deploy solutions which will: empower a larger pro portion of the populace to access the capital market; and unlock efficiencies in product and service delivery for capital market operators.”
He posited that a recurring theme in previous editions of the CEO Roundtable has been the dependence of the Nigerian economy on a singular commodity, the inability to extract value across supply and value chains as well as unfavourable business conditions to create a diversified economy.
And pointed out that it was vital to note that ideas generated in the past editions have provided the exchange with more insights in carrying out its advocacy efforts with policy makers, and some of these ideas have been implemented and have gone ahead to spur a rebound of the economy.
In his word: “Today, most of the world’s developed economies have begun to adapt to the Fourth Industrial Revolution, which has integrated digital, physical and even biological technologies, with clear impacts on unlocking latent economic value, with far reaching effects that have led to disruption of certain industries and creation of new ones.
The opportunity the Fourth Industrial Revolution presents is unlike any other, as the barriers to entry are low, with an upside that is vast and yet to be quantified.”
Automation of processes key to efficiency SEC had expressed its desire to automate its processes in a bid to conform to current technological trends the world over as well as ensure a more efficient capital market.
Director General of SEC, Mr. Lamido Yuguda, who stated this during a meeting with the Minister of Communication and Digital Economy, Mr. Isa Ali Pantami, last week, said automating most of the commission’s processes would also make the capital market more friendly to investors.
Yuguda said: “Presently, we have a lot of documents and papers being brought to the commission for one approval or the other, we think that if we can digitalise our processes and these documents are transmitted to us electronically, it will make it easier for the market that we regulate and also stimulate growth.
“If we can achieve that, it will also reduce cost and increase efficiency, that is why we are here today to discuss with you on areas we can work together to achieve this.” The SEC boss stated that the advent of COVID-19 had shown what can be achieved with technology, as during the period since March, the capital market has been working in spite of lockdowns and effects of the pandemic.
“Remember that when the lockdown started, the commission activated its Business Continuity Process which saw staff of the commission working remotely while all our electronic channels remain open to provide the necessary support to capital market stakeholders.
“They should also continue to disclose the trend and outlook for the company, and updates on implementation of business continuity plans. Public companies are to publish these disclosures on their websites and on other relevant media.
“We also told public companies who plan to conduct AGMs to ensure that the conduct of the meetings comply with the provisions of the Companies and Allied Matters Act, the Investments and Securities Act, the SEC Rules and Regulations, relevant government and health circulars and guidelines issued in this regard,” he noted.
The SEC DG stated that it would continue to engage and collaborate with all stakeholders to ensure that the capital market remains resilient. In his remarks, Pantami expressed the readiness of his team to collaborate with SEC in automating its processes, adding that the present administration is committed to promoting a digital economy.
He said: “With this lockdown, we have seen the advantages of digitalisation of processes, that is what has kept us going when everyone was locked down in their homes. We are currently at the forefront of promoting digital economy.
“We are very happy to look into areas that we can assist in digitalising your activities to ensure a better capital market. Digitalisation will certainly make processes easier and that is why we are championing it.” Pantemi said even the Federal Executive Council, FEC, had embraced technology as its meetings are now held virtually due to COVID- 19.
“Mr. President has embraced it fully and same with the Honourable Minister for Finance, Budget and National Planning, Mrs Zainab Ahmed, who is very passionate about technology and we know that she will support the SEC in this drive. It is even safer to automate and there is no better time than now to do it. We need to sit down and brainstorm on the model that will work well for the SEC and come up with modalities on how to deploy it” he added.
Initiative to reduce cost of business Prior to now, the immediate past boss at the commission, Mary Uduk, had said that technology when properly leveraged would reduce the cost of doing business in the capital market. This, Uduk said, was one of the reasons the apex regulator of the Nigerian capital market is encouraging the introduction of technology in the market.
According to Uduk, “we know that technology is driving a lot of things in the financial system at the moment.
For instance, in the banking system, technology is driving the payment system. Even with phones people can buy, make payments and even obtain loans among others. We have seen that there is a lot of innovation and cost reduction in the money market due to technology, and so we also want to do the same in the capital market.
“To this end, the capital market committee has set up a roadmap committee to come up with a guide for the capital market to enable us also leverage on technology to do business and reduce cost.
She disclosed that the commission had a division dedicated to fintech that will help look at all the technologies that relate to the capital market surrounding ICOs, among others. She said that in the capital market, technology had assisted in improvements of processes like the use of block chain to enhance settlement, and the use of technology to drive the platforms through which people are now able to come in to invest.
“Innovations in financial technology, has made possible the potential of using digital tools to make financial services available to a wider range of consumers and enterprises, promoting financial inclusion and the affordability of financial services.
“A financially inclusive society will provide increased access to finance, especially for women, help support sustainable growth and will create a million more jobs.
The gains of having a more inclusive financial system are enormous, as it helps broaden financial markets and make policies more effective,” she added.
With good regulations, the current drive of the market regulators is expected to deepen the capital market and reposition Nigeria as one of the leading digital economies in the region.