The Securities and Exchange Commission (SEC) has said that it is planning to grow non-interest capital market products to be 25 percent of the overall market capitalization.
This disclosure was made Tuesday by the Director General of SEC, Mr Mounir Gwarzo, in Abuja at a roundtable with a delegation led by the Lord Mayor of London Alderman Alan Yarrow and Nigerian regulators.
Mounir Gwarzo, who was represented by Zakawanu Garuba, Executive Commissioner, Corporate Services, stated that “our goal is to boost non-interest capital market product innovation so that the segment can be at least a quarter (25%) of the overall market capitalization.”
The SEC, he said, wants “to build a strong regulatory regime for non-interest products, encourage stakeholders in the non-interest capital market and ensure the emergence of Nigeria as a prominent non-interest capital market hub both at the regional level and globally.”
Gwarzo further stated that SEC was considering modalities for setting up a Sharia Advisory Council as a body of experts to advise on non-interest product applications.
To boost liquidity of non-interest products SEC, he added, is “working with a committee to support the FMDQ platform to enable secondary market trading of the products. We are also engaging the Central Bank of Nigeria (CBN) to obtain liquidity status for non-interest products (especially the sukuk).”
All these efforts, he noted, are hinged on the fact that “Nigeria has more than 80 million Muslims compared to Malaysia’s total population of 30 million. In addition, Nigeria has a larger economy than Malaysia’s, being the largest economy in Africa.”
To harness this potential, Gwarzo said proper planning was imperative which was “why at the SEC we set up an industry-wide committee of experts last year to produce a 10-year master plan on non-interest capital market product. Their recommendations have been incorporated into the broader capital market master plan which we have begun implementing. There have been many successful examples of market development through implementation of master plans and we are confident that our own master plan objectives will be achieved as well over the next decade,” he said.
In spite of the immense opportunity present in non-interest products, the SEC Director General lamented that Nigeria is faced with the challenge of lack of capacity.
Responding, Alderman Alan Yarrow, the Lord Mayor of London pledged the United Kingdom’s government support, stressing that “two things were universally agreed on, Islamic finance will be massive and it’s here to stay.” Alderman Alan Yarrow expressed concerns that “the difficulty of defining what Islamic finance actually is, is with different scholars and different countries supporting different rules. That is equally true here in Nigeria with about 88 million Muslims and 39 percent of the adult population unbanked.”
Yarrow said there “is a huge opportunity to offer Islamic finance as an alternative investment and finance model for both Muslims and non Muslims alike.”
Nigeria’s Exchange, he said, has a crucial role to play in that story since it is the second largest Exchange in sub-Saharan Africa, describing it as “the gateway to African markets and as such, the whole of Africa, to some extent, relies on Nigeria.”
The UK, he said, is prepared to help Nigeria “from looking at Nigeria’s legal framework, to helping to up the skills of your young, dynamic and ambitious population. London has the expertise, the variety and the capacity to help. And most of all, we offer the willingness and we stand ready to do our bit.”
Alderman Alan Yarrow said “there is already a thriving partnership between the Exchanges and an excellent pipeline of Nigerian businesses listing in London. But in the past few years, things have been shaken up by the arrival of non-interest finance and in particular, Islamic finance.”
He called on members of the Nigerian capital and financial derivatives markets to talk to him “and the business delegation and The City UK, whether it’s about Islamic finance, legal services or education, training and qualifications. That’s why we are here. And we all look forward to helping you in whatever way we can.”