Aigboje Aig-Imoukhuede, outgoing president of the Nigerian Stock Exchange (NSE) says the exchange has introduced measures to ensure that the bourse moves from being a frontier capital market to an emerging capital market. Aig-Imoukhuede, who said this in his valedictory ‘President’s Statement’ contained in the NSE 2016 Annual Report to stakeholders, pledged that the NSE will sustain efforts to operate at a level comparable to its peers in more advanced economies and subsequently become the flag bearer of global best practices.
Reflecting on the progress made by the exchange during his tenure as president, in line with his promise upon assumption of office, Aig-Imoukhuede noted that despite the challenging operating context at the time he became president, the exchange has introduced innovations that have raised operating standards at both the NSE and amongst capital market operators.
“For instance, we introduced regulatory outsourcing services and launched our market data product lines of business, which today form part of core activities of leading exchanges around the world,” Aig-Imoukhuede said in the statement. “Market data sales have since become one of our fastest growing sources of income, with a compound annual growth rate (CAGR) of 34% between 2014 and 2016.”
He added that the regulatory capacity of the exchange was fortified during his tenure, with the adoption of latest ‘Reg-Tech’ solutions adopted by leading exchanges globally, to enhance oversight, surveillance and supervision capabilities. These solutions, he said, include the X-Boss, designed to improve the efficiency and security of the regulatory communication between the NSE and the dealing member community, X-Whistle, which empowers investors to report possible market violations and “SMART,” a world-class surveillance system. He said that given the importance of corporate governance to investors and the relationship between quality of governance and market quality, the exchange introduced the Corporate Governance Rating System (CGRS) to enhance the ability of issuers to comply with the Securities and Exchange Commission’s (SEC) Code of Corporate Governance and the listing rules of the exchange and improve the fiduciary awareness of company directors.
“We did not just mandate compliance. We provided market operators with financial and technical assistance worth hundreds of millions of naira to build their internal capabilities,” he pointed out. “I am pleased to report that market operators had achieved a compliance rate of 95% as at December 2016.”
According to Aig-Imoukhuede, the NSE is resolutely marching to launch the first exchange-traded derivatives market in West Africa, as it seeks to affirm its market leader status. He said: “This strongly aligns with our strategic objective to facilitate order execution across five asset classes and offers our ever-increasing domestic and global investor base a greater array of products to diversify their portfolios and manage risks.”
Analysts say that derivatives are important financial instruments that enhance overall market efficiency, through asset price discovery and risk management. To investors generally, derivatives provide additional tool to better manage the risk-return profile of their portfolios, said Ahmed Razaq, CEO of Lagos-based CowryWise, in response to questions on the matter.
Aig-Imoukhuede said that during his tenure, the council of the exchange introduced robust governance and control standards to maintain the drive for global relevance, adding that these governance and controls largely reflect the principles which underpin sustainable good governance. Having identified gender diversity as a crucial ingredient of a dynamic capital market, Aig-Imoukhuede said that the NSE has initiated measures to ensure the inclusion of female members on the National Council.
He commended the Securities and Exchange Commission (SEC) for, whilst maintaining its independence and objectivity as the apex regulator of the country’s capital market, remaining a ‘powerful enabler of market development’ and enabling the NSE to record many milestones during his tenure.
“For instance, in 2014 we became the first African securities exchange to join the Inter-market Surveillance Group (ISG), an international group of exchanges, market centres, and market regulators that perform front-line market surveillance in their respective jurisdictions,” He said. “Also with the support of the SEC, we became the first frontier market exchange in our region to join the World Federation of Exchanges (WFE), following a rigorous and thorough application process.”
The NSE operated in a tough operating environment in 2016, with the Nigerian economy suffering its first recession in a quarter of a century as oil prices tumbled and inflation hit a decade high. Rigid regimented foreign exchange and other monetary policies drove investors from the Market; traders and operators scaled down activities; transaction volume and value plummeted.
Against this background, the NSE generated revenues of N4.46 billion in 2016, 31 per cent decline from the previous year, reflecting bearish sentiments prevalent in the market during the year 2016. “At the Group level, the NSE remained profitable with an operating surplus of N27.45 million,” Aig-Imoukhuede said. The NSE All Share Index (ASI) and market capitalisation stood at 35,957.24 and N12.393 trillion when trading closed at the bourse on Friday, having appreciated 33.80 per cent since the beginning of the year as at that date.
INNOCENT UNAH
