To facilitate a more robust and deeper financial market, operators in the Nigerian capital market have urged the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) to grant them single dealing lincense to access Discount Window.
The operators are currently being regulated by the Securities and Exchange Commission and they are cut out of the Primary Auction Market for Treasury Bills.
Speaking on the topic, “Deepening the Nation’s Capital Market for Economic Growth’ at the annual workshop of Financial Correspondents
Association of Nigeria (CAMCAN) in Lagos, the Group Managing Director of Dunn Loren Merrifield, Mr. Sonnie Ayere, said the access will boost liquidity of the operators in the market.
According to him, the reform will provide a much stronger platform for market based financial intermediation to thrive, ensure that they are well capitalised and regulated. Ayere, who is the President of Association of Issuing Houses of Nigeria explained that issuance of a combined Capital Market Dealing Lincense will reduce the numbers of lincenses being issued.
He said, “We are proposing that the CBN allow capital market institutions with the requisite capital (as agreed by CBN) access to Primary Auctions on behalf of themselves and their customers.
“Discount Window access can then be given to such operators to be able to discount for liquidity purposes all instruments normally acceptable to the Central Bank of Nigeria.”
He stressed that the CBN shouldn’t focus only on commercial banks, saying that the combined capital base of issuing houses, stockbroking firms is not up to the capital base of a smallest bank in the country.
The Vice President and Divisional Head, Corporate Planning, Kaodi Ugoji, who spoke on the same topic, noted that the country has been affected by illiquidity, lack of regulatory framework and high focus on reisk-free securities. Ugoji added that because of illiquidity in the market companies are borrowing short term funds to finance long term projects, saying that there is need to introduce measures to enlarge the domestic institutional investors base, particularly through pension sector reforms.
According to her, the importance of a strong and viable domestic capital market as an alternative source of finance in emerging economies has been affirmed by the success it has enjoyed in countries such as Brazil, Malaysia, Russia, India and China.
“With government economic reforms running at full throttle, prospects are high for the sustained development of the Nigerian Capital Market as a viable tool for driving Nigeria’s economic growth.
“Countries that have successfully leveraged the capital market for economic growth have a number of similar characteristics, some of which include: large domestic institutional investor base, developed infrastructure, macroeconomic stability, etc. Nigeria must therefore implement some of these initiatives in order to further deepen its capital markets for economic growth,” she added.