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‘How regulators can boost market liquidity, growth’

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CBN

Capital market experts have called for regulatory collaborations between the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) to create a friendly operating environment and boost stock market liquidity.

The experts argued that regulatory activities must be such that information and regulations can be disseminated across sectors to enable participants and operators to have the benefit of knowledge.

According to them, a situation where the Nigerian market operates in silos, especially in the areas of regulation, is a disincentive to growth objectives of both capital and financial markets.

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Specifically, Professor of Capital Market, Nasarawa State University, Keffi, Uche Uwaleke, said there must be a handshake between the apex bank and the SEC to deepen collaborative effort and ensure effective market regulation.

He suggested that the Chartered Institute of Stockbrokers of Nigeria (CIS) and the Chartered Institute of Bankers of Nigeria ( CIBN) must jointly organise yearly conferences and programmes with active participation of all regulators in both markets.

In addition, Uwaleke said regulation would also be strengthened if the Director General (DG) of the SEC would become the Chairman of the board of the commission.

“In amending the Investment Securities Act ( ISA) 2007, the SEC should be independent in such that the DG of SEC is also the chairman of the board to influence the decision of the board.”

Former President of the Association of Issuing Houses of Nigeria (AIHN), Sonnie Ayere had affirmed that effective collaborations between regulators would have a positive impact on the market, especially in the investment-banking segment.

He stressed the need for both regulators to co-regulate the sector and guarantee improved liquidity and access to funds for operators in the sector and enable these capital market operators to create liability through the CBN window to fund their operations under a joint regulation with SEC.

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“Today, the so-called investment banking companies that operate across the sector, such as asset management, securities trading, issuing house and trustees, lack access to funding. In fact, under their securities trading business, which is a very important component of the capital market, that area had no access whatsoever to funding. So, imagine a trader or stock broker or market maker that cannot find where he can borrow money from to buy a security. How does he trade? How does he create liquidity for himself?

“That is why if the foreign investors leave our market, the market gets depressed, because there is no ‘buy power’ and that is one of the biggest problem in capital market and we are trying to see how CBN can step in and help in supporting capital market operators within risk parameters, without putting any sort of increasing financial instability”, he added.

He pointed out that the problems with the Nigerian market is that the regulators generally operate in silos, noting that if the jinx is broken such that information and regulation can flow across regulators and enable participants and operators to have the benefit of different regulators, investment banking sector would make a much-more desired operating environment for the market.

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