Democritisation of data, ESG compliance enhance stock liquidity
The Nigerian Exchange Limited (NGX) has stated that democratisation of data as well as environmental, social, and governance (ESG) compliance are capable of enhancing stock liquidity and attracting the needed investments in the Nigerian capital market.
Divisional Head, Capital Markets at Nigerian Exchange Limited (NGX), Jude Chiemeka, at a panel titled ‘ESG and Sustainable Finance: the Future of Investments’, which was jointly organised by the Securities and Exchange Commission (SEC) and the Financial Centre for Sustainability in Lagos at the weekend.
Data democratisation is the ability for information in a digital format to be accessible to the average end user. The goal of data democratisation is to allow non-specialists to be able to gather and analyse data without requiring outside help.
Whilst noting that NGX is a member of the Sustainable Stock Exchanges Initiative, Chiemeka emphasised the exchange’s strong focus on technology, which facilitates investor access to essential data. According to him, seamless access to various products in the capital market is crucial, especially for retail investors.
There has been an increasing trend of data dependence in capital market participation and decision making. Globally, there is an increase in the reliance on market data as a tool for making sound financial decisions, and the Nigerian case is no different.
A study carried out by Refinitiv in 2020 shows that 57 per cent of capital markets professionals expect to spend more time analysing data, and 74 per cent believe data analysis to be the most important skill that will be required to work on the futures trading desk.
Furthermore, Chiemeka urged investors to consider companies that are ESG-compliant, as well as provide transparent and high-quality disclosures. He stressed the significant correlation between ESG disclosures and corporate performance.
“Companies on the Exchange that demonstrate strong ESG compliance often gain access to more capital, attract a broader investor base, and can even raise capital from foreign markets.
“The NGX Premium Board features companies that adhere to international best practices on corporate governance and meet NGX’s highest standards of capitalisation and liquidity. Compliance is not only a matter of prestige but also an indicator of sustainable growth, making these companies more appealing to both international and domestic investors”.
Chiemeka also commended the Securities and Exchange Commission (SEC) for its efforts in establishing a sustainable finance framework, especially in regards to green bonds.
“Nigeria’s issuance of a green bond solidified its position as the first sovereign country in Africa to do so, and we applaud the SEC’s role in making this possible”, he said.
Also at a panel discussion focused on ‘ESG and the Nigerian Business Environment’, NGX RegCo Chief Executive Officer (CEO), Tinuade Awe, had stated that companies that successfully incorporate ESG frameworks into their business operations are considered responsible corporate citizens. She said such companies can mitigate operational risks, attract sustainable investors, and generate long-term value.
She noted that prioritising the implementation of key national and global ESG-related regulations will improve Nigeria’s ESG performance and reputation on the global stage. Awe said it would also guarantee its contribution to the global development agenda such as the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement.
According to her, the rapidly evolving global ESG landscape requires a deliberate partnership between Nigerian public and private sector stakeholders to embrace their responsibility and help create a sustainable future.
She said this could be achieved by ensuring that their approach to addressing ESG-related risks and opportunities as well as their contribution towards sustainable development is done in a more transparent manner.
Awe stressed the need for the Nigerian government to adopt initiatives that accelerate progress towards mandatory reporting on key ESG-related issues and climate-related reporting.
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