As Nigeria grapples under a debt burden and cost of borrowing, the FMDQ Securities Exchange Limited says it is working towards the launch of Exchange Traded Derivative (ETD) products that will enable the government to raise funds at a cheaper cost.
Mr Oluwaseun Afolabi, the Head, Market Architecture, FMDQ Securities Exchange Limited, said this at the 2022 Capital Market Correspondents Association of Nigeria (CAMCAN) annual conference in Lagos.
Afolabi said the exchange was also working towards ETD products referencing sovereign securities such as the Federal Government of Nigeria Bonds and Treasury Bills to aid hedging and risk management by investors in these securities.
“A useful benefit of these ETD products is that they could help spur investors’ interest in the underlying sovereign securities thereby possibly reducing the government’s cost of capital.
“The Nigerian debt market organised by FMDQ Exchange is fairly developed enough to facilitate the raising of debt capital by the government and corporate issuers.
“The FMDQ Exchange markets facilitate the issuance and secondary market activity in a range of debt securities, as well as having the optimised matrix of financial market intermediaries/participants and most importantly supported by robust financial market infrastructures (FMIs) across the secondary market value chain,” he said.
On how the FMDQ has helped in deepening the Nigerian debt market, Afolabi said that the company in its capacity as a market organiser and self-regulatory organisation, has over the years pioneered and led various initiatives geared at deepening and promoting liquidity in the Nigerian debt markets.
These initiatives, he said, range from those targeted at spurring activity in the primary markets for money market debt securities such as Commercial Papers (CPs) and facilitating the issuance of short-term bonds.
Afolabi added that the company engages in secondary market initiatives such as market making, securities valuation, benchmark development and administration and expansion of the bouquet of debt securities and other financial instruments onboarded on the Exchange.
“FMDQ Exchange is at the forefront of regulatory advocacy and stakeholder engagements targeted at driving collective action by all relevant stakeholders towards deepening the Nigerian debt market.
“This is evidenced by its activities and collaboration with various financial market regulators such as the Securities and Exchange Commission, Central Bank of Nigeria, the Debt Management Office (DMO), and the National Pension Commission on various initiatives and programmes focused on developing the Nigerian debt markets.
Speaking on the success and acceptability of CPs in the country, Afolabi noted that CPs have become acceptable in the Nigerian financial market as evidenced by the milestones recorded by FMDQ Exchange in the Nigerian CP market.
“Since the entry of FMDQ Exchange into the CP market, the Nigerian CP market has grown from near zero levels about a decade ago in terms of capital raised to a market where about N3.17 trillion has been raised via CP issuances since the entry of FMDQ Exchange to date.
The Securities and Exchange Commission (SEC) at the event reiterated its commitment to drive the debt market-enabling environment to boost investors’ participation.
The Director-General, SEC, Mr Lamido Yuguda, who stated this through the Executive Commissioner, Operations, SEC, Mr Dayo Obisan, said the apex capital market regulating body is engaging the Minister of Budget and Finance, Mrs Zainab Ahmed, to create a level-playing field for debt market.
“By nature, the debt instrument is low risk,” he said.
Yuguda said that the commission would continue to fulfil its mandate of protecting investors and creating an enabling environment for market operators.
The Divisional Head, Business Support Services, Nigerian Exchange Limited (NGX), Mrs Irene Robinson-Ayanwale, in her goodwill message, commended CAMCAN for selecting the theme for the 2022 workshop.
Robinson-Ayanwale said the debt capital market is dear to the Exchange.
She acknowledged the support the Debt Management Office (DMO) has granted to the Exchange over the years.
“Exchange always visits the DMO for different proposals and they are always granted. We hope the joint collaboration and support will continue because it is very key to the debt capital market,” she added.
Mr Charles Egbunonwo who represented the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwue, said the theme selected was a topical issue in Nigeria’s economy.
According to him, “We are all aware of what is happening in terms of revenue and growing debt levels in the economy.”
Also speaking, the 1st Vice President, the Chartered Institute of Stockbrokers (CIS), Mr Oluropo Dada, who represented the President, Mr Oluwole Adeosun, noted that there was nothing wrong with government borrowing.
In his words, “If the government does not borrow again, how do I sustain my profession? We have issuers that secure these securities and trading platforms.
“Without trading platforms, we can’t have stockbrokers. So, there is nothing wrong with government borrowing. The issue all around the world is whether these debts are sustainable.
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