Why Investor-Driven Credit Rating are Key to a Viable Fixed Income Market


Monday, October 18, 2021/ 1:54 PM / Ottoabasi Abasiekong for WebTV / Header Image Credit: WebTV


A forward-looking regulatory environment and an investor-driven credit rating system are vital for Nigeria's fixed-income market growth. This formed part of the key takeaways from stakeholders at the Datapro and Association of Issuing Houses in Nigeria, AIHN event that discussed the theme "Post-COVID Recovery: Credit Rating Imperative For Issuers and Investors".


Delivering the keynote address, Tumi Sekoni, MD, FMDQ Securities Exchange Limited, who represented the Group Managing Director Mr. Bola Onadele, Koko speaking on the topic "Galvanizing the Ability Of The Nigerian Capital Market", said the debt capital market had the potential to raise N70trn.

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She acknowledged the role that the Central Bank of Nigeria, CBN, has played in providing affordable lending facilities for the growth of businesses in Nigeria.  


Sekoni stressed that an enabling environment was critical to developing a viable Nigerian capital market ecosystem.


She added that the Securities and Exchange Commission, SEC had issued two guidelines that served as a catalyst to derivatives trading and assured investors that FMDQ remained a  strong advocate for galvanizing the Nigerian financial market.


In his goodwill message, the Director-General of the Securities and Exchange Commission, SEC,  represented by Mr. Adamu Sambo, stated that credit rating is essential in providing disclosure in the fixed income market.


The SEC DG emphasized that credit rating is just an opinion; it is not the only opinion used by my investors to make decisions. He noted that it was essential to have an investor-driven credit rating system.


He added that disclosure by the rating agencies is critical to improving investors' confidence in the capital market, thereby improving the depth and quality of the market.

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In her remarks, the CEO of NGX Regulatory Company Limited, Tinuade Awe, said discussions around the credit market are significant for the economy's growth.


On his part, the CEO of Lagos Commodities and Futures Exchange, LCFE, Mr. Akinsola Akeredolu-Ale, believed that people have to be confident in the market to participate. The market leader said risk management is required to fulfill a sound credit rating system.


The forum featured a panel session on "Accelerating Nigeria's Debt Market: What's Next?" moderated by Mr. Ike Chioke, President, AIHN, which featured Mr. Oladele Adeoye, Executive Director, DataPro Limited, Alhaji Kabiru Rabiu, Executive Director, BUA Group represented by Jacques Piekarski and Mrs. Funke Okoya Executive Director, Nova Merchant Bank.


Mrs. Funke Okoya believed that regulations help boost compliance and ensure that the behaviours of organizations are transparent in actions and align with governance principles.


Jacques Piekarski said the critical success factors that improve companies' rating in terms of financial performance include balance sheet structure, equity, and the capacity of the board and management.


Rating agencies pay attention to processes, accountability, procedure, transparency in place and documentation, government procedures, some other factors, not just size.


Giving his opinion, Mr. Adeoye stressed the need for rating agencies to pay attention to processes, accountability, procedure, transparency, and documentation, amongst other factors, in carrying out their assessment.

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