The Aluko & Oyebode Capital Markets Insight is a quarterly report providing updates on laws, regulations, and other activities in the Nigerian capital markets.
This edition outlines updates from regulators of different capital market segments in Nigeria.
FMDQ RENAMES I&E WINDOW, NAFEM
On 19 October 2023, the FMDQ Securities Exchange (“FMDQ“), a wholly-owned subsidiary of the FMDQ Group PLC, renamed the Investors and Exporters FX Window, popularly known as “I&E Window,” the Nigerian Autonomous Foreign Exchange Market (“NAFEM“). This change is consistent with the operational changes to the foreign exchange market, issued by the Central Bank of Nigeria (“CBN”) on 14 June 2023. Notably, this change signifies the elimination of segmentation in the Nigerian foreign exchange market and an alignment with the unification within the market.
NGX ADMITS FIRST NAIRA-DENOMINATED INFRASTRUCTURE FUND
On 5 October 2023, the Nigerian Exchange Limited (“NGX“) admitted and listed on its platform, the first local currency-denominated infrastructure investment trust fund in Nigeria and Sub-Saharan Africa, the Nigeria Infrastructure Debt Fund (the “Fund“), a N200,000,000,000.00 (Two Hundred Billion Naira) public infrastructure investment fund issued by Chapel Hill Denham. The Fund which was created in 2017 is backed by major institutional investors including the Nigeria Sovereign Investment Authority. It is expected that this listing will engender significant infrastructural growth and development in Nigeria.
NEPZA SET TO DIGITISE OPERATIONS AND LIST FREE TRADE ZONES ON NGX
The Nigerian Export Processing Zones Authority (“NEPZA“) has announced its commitment to list all Free Trade Zones nationwide on the NGX. This is aimed at attracting increased investment. To align with global standards and adopt best practices, NEPZA also intends to digitise its processes, thereby enhancing efficiency.
NGX PROPOSES DUAL LISTING WITH SAUDI STOCK EXCHANGE
The Nigerian Exchange Group (“NGX Group“) has announced plans to partner with the Saudi Stock Exchange to promote dual listings. The collaboration between the exchanges will encourage cross-border access between the markets, creating deeper liquidity pools and increasing the diversity of investment products.
The NGX Group aims to leverage the opportunities in dual listing to attract more diverse international investors.
SEC LINKS RECLASSIFICATION OF NIGERIAN SECURITIES BY FTSE-RUSSELL AND MSCI TO FOREIGN EXCHANGE CHALLENGES
The FTSE-Russell, a subsidiary of the London Stock Exchange Group recently downgraded the Nigerian equities market, while the MSCI Nigeria Index, which is designed to measure the performance of large and mid-cap segments of the Nigerian market, has announced plans to reclassify the Nigerian market from frontier market to stand-alone market status in February 2024. The Securities and Exchange Commission (“SEC“) has attributed the downgrade and potential reclassification to the challenges with foreign exchange liquidity and its effect on investor confidence. This development has incited calls for strategic intervention to tackle the ongoing foreign exchange challenge, with a view to instilling confidence in the markets.
SEC TO COLLABORATE WITH NAICOM AND CMOS TO ENHANCE COMMODITY SUPPLY CONTRACTS
The SEC has announced a potential collaboration between itself, the National Insurance Commission (“NAICOM“), and Capital Market Operators (“CMOs“) to enhance commodity supply contracts by eliminating disruptions in the commodities market. This partnership aims to limit the risks associated with investments in the commodities market and promote the active participation of investors in the market.
EXTENSION OF INVESTMENTS AND SECURITIES (EXEMPTION OF STATE GOVERNMENTS ETC.) ORDER 2019
The SEC has informed the public that the Federal Ministry of Finance has approved an extension of the validity period for the Investment and Securities (Exemption of State Governments etc.) Order 2019 (the “Order“) to 27 December 2025. The Order re-qualifies the conditions for the issuance of securities by state governments and the Federal Capital Territory (“FCT“), outlined in section 223 of the Investment and Securities Act (“ISA“), and fully exempts state governments and the FCT from complying with the requalified conditions in the Order where the capital raised from the capital markets is intended to finance verifiable projects.
It is notable that the term “verifiable projects” is not defined in the Order. It is expected that state governments and the FCT would take advantage of the extended period of the Order to raise funds from the capital markets to undertake projects targeted at infrastructural development.
AFRICAN DEVELOPMENT BANK TO ISSUE HYBRID CAPITAL NOTE
The African Development Bank (“AfDB“) has announced its intention to issue a pioneering hybrid note (the “Note”), reportedly the first multilateral lender to undertake such an issuance. According to relevant personnel of AfDB, the note will be sized between $500 million and $1 billion, and will be issued if the market conditions are right. The Note may be a perpetual debt security that will not mature but can function like shares. This sort of instrument may have low credit ratings (lower than AAA-rated bonds) because the Issuer is allowed to defer interest payments and may not repay the capital over a long period. The issuance of the Note, with its unique features, is anticipated to reshape the perception of capital instruments in the financial landscape.
ANNUAL REGISTRATION OF CMOs FOR THE YEAR 2024
The annual registration of CMOs for the year 2024 will commence from 1 January 2024. In line with SEC’s rules and regulations, all CMOs are to complete the process of renewal of registration for 2024 on or before 31 January, 2024, via the Commission’s portal.
NGX GROUP MAKES NEW APPOINTMENTS
With effect from 1 January 2024, and pending formal SEC approval, the Nigerian Exchange Group Plc (“NGX Group”) has announced the appointment of Mr. Temi Popoola as the GMD / CEO designate, succeeding the current GMD / CEO, Mr. Oscar Onyema, OON. Mr. Onyema will conclude his tenure on 31 March 2024 and, ahead of this, will embark on his terminal leave effective 1 January 2024. Also, Mr. Jude Chiemeka has been appointed as the Acting Chief Executive Officer (CEO) of Nigerian Exchange Limited (“NGX”) effective 1 January 2024. Mr. Chiemeka will take over from Mr. Temi Popoola as CEO of NGX.
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