SEC Set to Support the Development of Nigeria's Non-Interest Capital Market

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Friday, July 23, 2021  / 11:00 AM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV


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The Securities and Exchange Commission (SEC) Nigeria is resolute in developing a Non-Interest Capital Market. In a recent presentation at the maiden WebTV Islamic Finance Webinar, Mr. Abdulkadir Abbas, Head of Department, Securities, and Investment Services SEC Nigeria, said in 2015 the commission designed a 10-year Capital Market Master Plan. The plan aimed to promote non-interest capital market products and the target was to achieve 25% of market capitalization by 2025.


He noted that the 2020 Islamic Financial Services Stability Board Report revealed that industry assets, grew by 11.4% in 2019 to $2.44trn from $2.19trn recorded in 2018.


According to Abbas, the growth was supported by the increase in Sukuk issuances in the market. He said the Nigeria Islamic finance sector continues to grow because of growing interest and enthusiasm from institutional investors and new players in the market.  


Speaking further, he said the strategic objectives of the capital market non-interest market was to focus on four pillars, covering:

  1. Building a strong regulatory foundation for the Non-Interest Capital Market
  2. Encouraging the development of Non-Interest Capital Market stakeholders
  3. Encouraging the development of Non-Interest Capital Market products
  4. Recreating a regional Non-Interest Capital Market hub   

 

In 2008, SEC launched the first Islamic mutual fund by Lotus Capital, in 2010 Rules and Regulation on Islamic Collective Investment Schemes (ICIS) was released, in 2012, NSE launched the NSE lotus Islamic Index to track the selected shariah-compliant equities. In 2013, SEC came up with a regulation in Sukuk issuance, the Osun State National Sukuk N11.4bn with 7-year tenure.


With regards to strategic initiatives, he said SEC was focused on strengthening institutional capacity, collaborating with the financial sector, conducting public awareness and education programmes on the non-interest capital market products to achieve a win-win situation in the market.


In 2008, SEC launched the first Islamic mutual fund floated by Lotus  Capital, while in 2010 the Rules and Regulation on ICIS were released.  In 2012, the defunct Nigeria stock exchange launched the NGX lotus Islamic Index, to track the selected shariah-compliant equities. In 2013, SEC came up with regulation in the Sukuk issuance, with Osun State's National Sukuk bond of N11.4bn within a 7 -year tenure.


On the side of the achievements so far in the development of the Islamic capital market, he said SEC has engaged the Pension Commission and Central Bank of Nigeria (CBN). This covered issues around liquidity guidelines as part of the Apex regulator's harmonized framework.


He added that the regulator issued Shariah governance, a Federal Inland Revenue Service (FIRS) exposed draft Tax regulation for NICMPs, and partnered with the Debt Management Office (DMO) to issue a sovereign Sukuk to establish a benchmark yield curve for Nigeria.


The SEC official noted that the regulator has targeted specific sectors, on how to target the issuers, the stakeholders, and other market operators.


On the side of investment opportunities in the market, Abdulkadir Abbas said Nigeria is estimated as the largest economy in Africa with a gross domestic product of over $400bn with a significant Muslim population and infrastructure deficits in every sector.


He said, "Nigeria faces additional pressures from a rapidly growing population, also the various existing instruments coupled with strong investors' appetite, will catalyze opportunities in the real estate, derivatives and alternative investment options encouraging socially responsible investment and sustainability".    


Mr. Abdulkadir admitted that the non-interest capital market is still at its nascent stage in Nigeria. He said the SEC remained resolute to continue to collaborate with market stakeholders to introduce regulations, to provide a level playing field for all participants in the markets. to continue to foster partnerships for capacity building, to embrace digitization to support innovative products such as crowdfunding to facilitate Islamic finance through SMEs, and to develop a dynamic, fair, transparent, and efficient market where investors and businesses in Africa could invest and raise sharia-compliant capital.


Speaking on the achievement was 2016 lotus Shariah Fixed Income Fund, 2017 sovereign Sukuk N100bn and was 6% 2018 Sukuk 100bn and was 34% oversubscribed, in 2019 Stanbic IBTC Shariah Fixed Income Fund, 2020 FGN sovereign Sukuk N150bn and was 464% oversubscribed and United Capital Sukuk Fund. 


On the side of investment opportunities in the Market, Abbas said Nigeria is estimated as the largest economy in Africa with a gross domestic product of over $400bn and also has a significant Muslim population, Nigeria currently has a significant infrastructure deficit in every sector and faces additional pressures from a rapidly growing population, also the various existing instruments coupled with strong investors' appetite will catalyze opportunities in the real estate, derivatives and alternative investment options and also COVID-19 has encouraged socially responsible investment and sustainability.    


The SEC executive said that the non-interest capital market is still at its nascent stage in Nigeria. He said the SEC remained resolute to continue to collaborate with market stakeholders to introduce regulations, to provide a level playing field for all participants in the markets, to continue to foster partnerships for capacity building, to embrace digitization to support innovative products such as crowdfunding to facilitate Islamic finance through SMEs, and to develop a dynamic, fair, transparent, and an efficient market where investors and businesses in Africa could invest and raise sharia-compliant capital.


He noted that some of the milestones achieved so far in the non-interest capital market include:

  • The Launch of the 2016 lotus Shariah Fixed Income Fund
  • Issuance of the 2017 N100bn sovereign Sukuk which was 6% subscribed in 2018
  • Issuance of the N100bn which was 34% oversubscribed
  • Launch of the 2019 Stanbic IBTC Shariah Fixed Income Fund
  • Issuance of the 2020 FGN N150bn sovereign Sukuk N150bn which was 464% oversubscribed and
  • The Launch of the United Capital Sukuk Fund. 


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