Business
Deployment of IT, BVN critical to speedy offer verification – Economist
Economist and capital market expert, Mr Johnson Chukwu, has advised the Central Bank of Nigeria (CBN) to tackle delay in the verification of banks’ offers and ensure speedy conclusion of the process by deploying available Infrastructure technology and Bank Verification Numbers (BVN).
Chukwu was the guest speaker at the 2024 annual workshop of the Capital Market Correspondents Association of Nigeria (CAMAN) with the theme: ‘Banks’ Recapitalisation: Bridging the Gap Between Investors and Issuers in the Nigerian Capital Market’ held in Lagos at the weekend.
He was sharing concerns among investors over the delay in the apex bank’s verification process, especially as it has not been able to conclude any almost four months after the closure of some offers.
Chukwu, who is also the Chief Executive Officer of Cowry Asset Management Limited, said the deployment of high level of IT available at the CBN and the use of the BVN would fastrack the process of accepting or rejecting offers and enable investors get their allotment or deploy their funds in other profitable economic activities.
He argued that while the apex bank’s role in verifying the source of the capital invested is important, the longer period for completion of the verification process is dampening investors’ confidence.
According to him, this is particularly worrisome for investors whose funds may be returned where the offers may be oversubscribed given the missed reinvestment opportunities.
Chukwu also stated that the current CBN requirements for investors investing in banks shares are seen by many as overly stringent and creating barriers for both issuers and investors.
He cited the provision of three-year audited financial statements, board resolution authoring the investment and tax clearance certificates for the past three years for corporate investors, noting that these requirements are disincentive to investment in the capital market.
He added that while regulation is necessary for maintaining the stability and integrity of the financial system in ensuring that unqualified capital is not invested in the banks, there is need to leverage on existing customer information in the banking system to avoid imposing onerous conditions on investors.
Chukwu described banks’ recapitalisation as a key strategy for strengthening the Nigerian banking sector and fostering economic growth.
He, however, argued that the success of these efforts hinges on effectively bridging the gap between investors and issuers in the capital market.
Outlining the role of the capital market in the recapitalisation exercise, Chukwu noted that when banks access the capital market and demonstrate their ability to raise capital through successful IPOs, rights issues and bonds, it strengthens investors’ confidence and sends a positive signal to the broader financial market.
This is because a well-capitalised bank is perceived as financially stable, reducing risk for investors and enhancing market confidence. Chukwu added that this encourages further investment in the banking sector, which is essential for the sustainable growth of the industry.
He, however, called for concerted efforts from both banks and investors, supported by regulators in ensuring that the Nigerian banking sector remains resilient, competitive, and capable of driving the country’s economic growth for the future.
Chukwu also urged the CBN and other regulatory bodies to work together in creating a more predictable regulatory environment for banks and investors.
“The frequency of regulatory policy changes need to be moderated to allow for better planning for both banks and the investing public as well as reduce the regulatory and operational risks associated with these frequent changes.
“Banks must commit to improving their transparency and disclosure standards. This includes the publication of detailed and accurate financial statements, risk disclosures, and forward-looking guidance.
“By addressing the challenges of information asymmetry, regulatory uncertainty, and liquidity, while improving transparency, corporate governance, and financial innovation, the Nigerian capital market can unlock new opportunities for bank recapitalisation,” he said.
Earlier, Director-General, Securities and Exchange Commission ( SEC), Dr Emomotimi Agama, who was represented by the Divisional Head, Legal and Enforcement of the SEC, Mr John Achile, stated that the commission provides oversight to every operation in the market, ranging from technology innovations to market infrastructure.