How digital innovation is repositioning capital market, economy — Expert

Head of Business Technology and Digital Innovation at Central Securities Clearing System (CSCS) Plc, Mr Tobe Nnadozie, has revealed the role digital innovation is playing in expanding the capital market and the economy.

He made the disclosure recently in Ibadan, Oyo State, during the Annual Chartered Institute of Stockbrokers’ Conference 2024.

According to him, the deployment of digital innovations has enhanced the sector, boosted confidence, reduced fraud, and contributed to the growth of the economy.

He urged all stakeholders in the industry to embrace digital innovations in their daily operations.

Speaking on ‘Harnessing Digital Innovation for Capital Market Expansion and Economic Growth in Nigeria’, Nnadozie said the time had come to unlock the potential of the nation’s capital market.

According to him, digital innovation refers to the use of technology to create new or improve existing products, services, and processes. This, he added, includes fintech solutions, blockchain and cryptocurrency, as well as artificial intelligence and data analytics.

While noting that capital markets are financial markets where companies and governments can raise money by selling securities, Nnadozie lamented a situation where many accounts in the market were inactive.

He said: “As of September 2024, there were 6,099,128 total tradeable accounts, 531,262 active accounts, representing only 9.54 per cent, while 4,128,068 were suspended accounts. This speaks volumes.”

Nnadozie noted that the market currently faces a myriad of challenges that threaten the growth of the sector and the nation at large. However, he said these constraints were not insurmountable if there was a willingness to adopt digital innovations by all concerned.

“Nigeria’s capital market faces several challenges, including low liquidity, limited investor participation, and inadequate regulatory frameworks, which create barriers to growth. The Nigerian capital market presents opportunities for growth, including the potential for increased institutional and retail investor participation, leading to a more liquid and diversified market,” he said.

He added that when digital innovation is embraced, it will lead to improved efficiency by automating processes and reducing transaction costs, making it easier for investors to participate in the market. Nnadozie further explained that innovation would also bring about transparency, making it easier for investors to access information and track transactions, reducing the risk of fraud or manipulation.

Additionally, the CSCS official added that digital innovation in capital markets can expand investor participation by making it easier for new investors to enter the market, thereby increasing liquidity and diversifying investment opportunities.

Nnadozie said that digital innovations will lead to increased investment and liquidity, as well as encourage job creation and entrepreneurship opportunities. He said that digital investment platforms were making capital markets more accessible to retail investors, allowing them to invest in a wide range of financial products and services from anywhere, at any time.

On strategies to promote digital innovation in Nigeria, Nnadozie advocated for a policy and regulatory framework, public-private partnerships, capacity building, and education, along with a well-educated investor base.

He commended the regulator, the Securities and Exchange Commission (SEC), for its commitment to various initiatives that are driving digital innovation in the capital market. According to him, one of the major steps taken was the Know Your Customer (KYC) update and new account validation system. This major initiative, he added, has led to the easier adoption of digital solutions in the market.

He said that both issuers and the Nigerian Exchange (NGX) have made noticeable progress through the digital trading platform, which has eased the ongoing rights and public offers in the market.

He advocated for more of these initiatives and emphasized that the CSCS, through its current leadership, has created the foundational layers of digitalization with various self-service portals and Application Programming Interfaces (APIs) and will be willing to collaborate with the market.