Non interest capital market has enormous potentials — Yuguda

The Securities and Exchange Commission has stated that the non interest capital market has enormous potentials and capable of growing the market capitalisation by 25% by the year 2025.

This was stated by the Director General of the Securities and Exchange Commission Mr. Lamido Yuguda during a meeting with the Executives of Non Interest Financial Institutions Association of Nigeria in Abuja weekend.

Yuguda stated that the Capital Market Master Plan has a target that by the end of the plan period, 25% of market capitalisation in the capital market should come from the non interest sector.

“We are talking of trillions, that means that right now we are not really scratching the surface. Both the market and the Commission needs 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 suskuk to other players in the market. This is a simple product but a very powerful one.”

Yuguda stated that Nigeria needs to adopt the normal sukukforms 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.

“That’s the traditional way and that’s what happened in countries like Malaysia. Maylaysia has a lot of hotels and resorts and the key financing tool that they have used is the sukuk. They understand the power of this sukuk instrument. It’s a collateralised form of lending, the asset is built and it belongs to the people who have contributed money.

“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 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.”

The SEC DG emphasised the need for all stakeholders to create more awareness, as there is a lot of ignorance, misconceptions among others about sukuk and they all need to be addressed.

“A lot of countries have made tremendous progress which I think we can learn from. Once people see it and it is really working we will get a lot of people interested in the sector.

“The Commission is ready to commit resources, both human and material to ensure that the market grows to the level we want. We are interested in the growth of the market as that will have a positive effect on the economy of the country,” Yuguda stated.

Yuguda disclosed that the Commission has just exposed the rules for shariah advisors in its drive to grow this segment of the market.

According to the Yuguda, Shariah governance is crucial considering that compliance with Shariah rules and principles is important in Non-interest Capital Market operations/transactions.

“The market is developing fast and there is need for proper regulation of those that will drive the process. The provision of the rules is in line with local and international best practices. The regulatory organization in the Nigerian Financial System such as CBN, NAICOM had issued such guidelines to provide clear and good Shariah governance in their respective sectors.

“Making the Shariah Advisory service a registrable function in the market will assist in effective implementation of the proposed consolidation of the Shariah governance rules and will also be an additional source of revenue to the Commission,” the Commission stated.

Speaking earlier, The President of NIFIAN Mr. Hassan Usman urged the Commission to provide a framework for non interest finance in a bid to avoid miss use of the platform by operators.

Usman stated that Nigerians need more awareness on non interest capital market and stated that the Association is interested in programmes that will increase enlightenment of the product and boost its contributions to market capitalisation.