The Securities and Exchange Commission (SEC) Nigeria has said that the non-interest capital market has enormous potentials and capable of improving the market capitalization by 25% by the year 2025.
The SEC Director General, Mr. Lamido Yuguda, made this remark during a meeting with the Executives of Non-Interest Financial Institutions Association of Nigeria (NIFIAN) at the weekend in Abuja
He explained that the Capital Market Master Plan had a target that by the end of the plan period, 25% of market capitalization in the bourse should come from the non-interest sector.
Yuguda said: “We are talking of trillions. That means that right now we are not really scratching the surface. Both the market and the Commission need to do more. We are working on ensuring that we have a framework that looks at issues relating to non interest capital market and ensure we tackle them.
“There is a lot of opportunities in the market right now for non-interest products. The biggest players right now are the pension fund. PenCom is interested that whatever product is there has some basic risk management features in them but I think there is a lot that we can do.
“You talk about the Sukuk market and the move towards complexities, I would say that even the simple Sukuk, we have not had enough of it. When we came in 2020, it was only the sovereign Sukuk and the sub national Sukuk from Osun state.
“We have tried to attract interest to the product by doing a lot of seminars and re-joined IFSB fully. We also tried to encourage private issuers, as well as show the potentials of the Sukuk to other players in the market. This is a simple product but a very powerful one”, he added.
The capital market regulator further stressed that Nigeria needed to adopt the normal Sukuk forms, where money is raised via Sukuk, assets are built and then cash flows are generated from the assets which then flows back to the Sukuk holders.
According to him, that is the traditional way and that is what happened in countries such as Malaysia with many hotels and resorts and the key financing tool that they have used is the Sukuk.
Yuguda pointed out that such countries understood the power of Sukuk instrument as a collateralized form of lending that helps in building the asset which belongs to the people who have contributed money.
He said: “You can see the cash flows coming back. These hotels are increasing in output in the economy in which it is located, people are working and earning more incomes, the investors are happy because they are receiving the cash flows and the country is getting more prosperous as people from other parts of the world are going there to have a good life”.
Yuguda promised that the commission was ready to commit resources, both human and material to ensure that the market grows and have more positive impact on the nation’s economy.
In demonstration of the commitment, the investment expert disclosed that the commission had just exposed the Rules for Shariah Advisors since Shariah governance is crucial considering that compliance with Shariah rules and principles is important in Non-interest Capital Market operations/transactions.
Speaking earlier, the NIFIAN President, Mr. Hassan Usman, appealed to the Commission to provide a framework for non-interest finance in a bid to avoid miss use of the platform by operators.
Usman said that Nigerians needed more awareness on non-interest capital market, promising that the association is interested in programmes that will increase enlightenment of the product and boost its contributions to capitalisation of the nation’s equities market.
