COVID-19: Capital market operators say recapitalisation not desirable for now
Capital Market Operators (CMOs) on Tuesday called on regulators to suspend any fresh plan for recapitalisation of the stockbroking community for now, due to economic realities occasioned by COVID-19 pandemic.
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Mr Tunde Amolegbe, President, Chartered Institute of Stockbrokers (CIS), gave the advice at a webinar organised by the Capital Market Academics of Nigeria.
Recall that the Securities and Exchange Commission(SEC) in February hinted of plans for recapitalisation of stockbroking firms ahead of the change of ownership of the Nigerian Stock Exchange.
Ms Mary Uduk, then SEC acting Director-General, said with only 10 per cent of the 255 stockbroking firms controlling 80 per cent of the market activities, there was a need for recapitalisation.
Speaking at the webinar, Amolegbe said regulators should suspend any such move for now due to the coronavirus pandemic.
He said COVID-19 had slowed down NSE demutualisation programme, noting that funding challenge of the CIS would be more aggravated.
The CIS president said that given its importance, the Federal Government should treat the capital market as a priority sector with regard to COVID-19 alleviation strategies.
“In view of the existing major constraints with regard to trading liquidity, the Central Bank of Nigeria should formulate policies that will drive more liquidity into the hands of CMOs, especially equity traders,” he said.
Amolegbe said that stability and growth of the equity market would catalyse overall market rebound and economic growth.
“We can start with banks giving significant concessions to CMOs through margin facilities and other lines of credit for trading,” he said.
According to him, banking stocks should be restored to marginable stocks list with strengthened guidelines.
Amolegbe also called for industry-wide effort on reducing unclaimed dividend phenomenon, using innovations brought about due to COVID situation.
He said the time-to-market for new debt and equity issues should be reduced in order to get funding to critical sectors of the economy.
The CIS chief also stressed the need for the launch of a derivatives market because it was needed to hedge investments at a time of elevated risks such as this.
He observed that the Nigerian capital market was substantially challenged even before the coming of the coronavirus.
“The equity market, which drives performance of the other market segments had been characterised by low investor patronage and low liquidity ever since the global financial crisis which hit Nigeria in 2008,” he said.
On recommendations for CMOs, he urged them to embrace and elevate use of technology in their operations, especially remote business devices.
He explained that COVID-19 had shown that it was possible to run 100 per cent e-brokerage without the need for a physical location.
Also speaking, Dr Suleyman Ndanusa, former SEC DG, said regulatory environment must be innovative and as well embrace business continuity plan.
On the role of regulators in mitigating the impact of COVID-19, Ndanusa said modern economy was dependent on sound capital market.
He said that market regulators must ensure ease of doing business to attract more foreign portfolio and direct investment into the country.
Ndanusa said regulators must stay nimble and create regulatory environment for innovation and expect regulatory changes that come with added costs.
He noted that regulatory budgets must be architected for efficiency, savings and value for money.
Ndanusa called for automation of regulatory reporting obligations, Internet of things (IOT) devices and data to automatically prescribe trade malfeasance and remediation.
“The COVID-19 induced crisis is a call to deepen reforms in the Capital Market Regulatory landscape. The future is now, so lets take it,” he said.
Ndanusa tasked regulators on investor protection and transparency to boost confidence in the Nigerian capital market.
Prof. Wilson Herbert, of the Federal University Otuoke, called for introduction of new products that would centre on challenges posed by COVID -19.
Herbert stressed the need for research on bonds such as food security development bonds that would help the country in such trying times.
He noted that importance of education could not be overlooked, being an engine that drives economic development.
According to him, government should increase budget allocation given to education sector and research institutions to achieve the desired growth and development.
The News Agency of Nigeria (NAN) reports that the webinar was themed: “Mitigating the Impact of COVID -19 on the Capital Market”.