Category: Capital Market

The Chartered Institute for Securities and Investments (CISI), United Kingdom (UK)’s professional body for the capital market, and the Nigerian Exchange (NGX) have lauded the mutual benefits from continuing partnership between the two bodies.

CISI beat the ceremonial closing gong at the NGX as part of activities commemorating CISI’s 30th anniversary.

Director, Global Business Development, Chartered Institute for Securities and Investments (CISI), Mr. Kevin Moore, commended the Nigerian capital market community for supporting the CISI since its emergence from the London Stock Exchange in 1992.

“As an institute that thrives on collaboration and the support of volunteers, I must say that NGX is one of the best partners the CISI has had in one of the most exciting countries we operate. We are confident that the partnership will continue to thrive even as we advance over the next 30 years.

“As the capital market continues to evolve, we are certain that no matter how interesting the topics to consider become, CISI will stay true to its ageless motto – my word is my bond,” Moore said.

Divisional Head, Listings Business, Nigerian Exchange (NGX), Mr. Olumide Bolumole said the Exchange was excited to commemorate the 30th anniversary of CISI, noting that the institute is a leading global professional body for securities, investment, wealth and financial planning professionals.

He acknowledged the achievements of the institute in raising the standards of skills and qualifications as well as enhancing trust in the financial services sector in the past 30 years.

“Through the learning arm, X-Academy, NGX is pleased to have joined forces with the institute to achieve greater public benefit by raising professionalism across financial services by delivering a wide range of trainings and globally recognized certifications for financial and investment professionals.

“Whilst embracing our role in the financial services ecosystem through capacity building, we will continue to actively engage with the community to aid the advancement, dissemination of knowledge and certification of professionals in the field of securities and investments,” Bolumole said.

According to him, since the partnership between CISI and NGX’s X-Academy was established in 2018, over 100 participants have passed through the academy, participating in various trainings on securities and investment as well as capacity development activities initiatives that contribute towards international certification in wealth and investment management.

He added that with the surge of alternative securities such as Sukuk, working with the CISI, international and Nigerian representatives, X-Academy has introduced trainings on Islamic finance and other capital market instruments.

CISI, a not-for-profit, professional body emerged from the London Stock Exchange in 1992 with 4,800 members in the UK. CISI now provides qualifications, continuing professional development and upholds standards of integrity for its 45,000 members in over 100 countries. CISI’s membership spans wealth management, financial planning and capital markets and in partnership with regulators in over 70 jurisdictions, delivers 40,000 exams a year.

 

 

 

 

Three banking groups accounted for nearly a quarter of transactions at the Nigerian stock market as investors sought to take positions in the highly influential banking sector ahead of the release of full-year earnings for banks.

Transaction data at the weekend indicated that the trio of Access Bank Plc, Guaranty Trust Holding Company Plc and Fidelity Bank Plc were the most active stocks and accounted for 23.8 per cent of the 1.33 billion shares traded at the Nigerian Exchange (NGX) during the week.

With more investors opening up market orders to close deals at premium, the NGX Banking Index- which tracks the banking sector, recorded the highest gain of 2.34 per cent during the week, compared with the negative overall return of -0.16 per cent for the week.

The rally nudged NGX Banking Index\s average year-to-date return above the market average at 11.67 per cent, as against market’s average return of 10.50 per cent so far this year.

According to the report, the three most active stocks accounted for 316.76 million shares worth N4.35 billion in 3,476 deals, representing 23.80 per cent and 19.18 per cent of the total equity turnover volume and value.

Most banks had opted for a filing regime that mandates them to file their audited report and accounts for the immediate past business year not later than 60 days after the end of the year. Thus, banks are expected to submit their audited report and accounts for the year ended December 31, 2021 not later than March 1, 2022.

Investors traded a total of 1.33 billion shares worth N22.70 billion in 24,039 deals last week at the NGX as against a total of 1.785 billion shares valued at N19.614 billion traded in 27,822 deals two weeks ago.

Driven by transactions in the banking sector, the financial services industry topped the activity chart with 886.121 million shares valued at N10.058 billion traded in 11.563 deals; representing 66.60 per cent and 44.31 per cent of the total equity turnover volume and value.

Further analysis showed that the consumer goods industry occupied a distant second with 107.592 million shares worth N4.472 billion in 3,833 deals while the conglomerates industry placed third with a turnover of 102.192 million shares worth N198.077 million in 1,008 deals.

Also, a total of 31,239 units of Exchange Traded Products (ETP) valued at N37.245 million were traded in 53 deals last week compared with a total of 24,350 units valued at N574, 834 traded in 38 deals two weeks ago.

At the secondary debt market, a total of 79,150 bond units valued at N83.79 million were traded in 25 deals last week compared with a total of 61,682 bond units valued at N63.31 million traded in eight deals penultimate week.

Pricing trend analysis showed average decline of 0.16 per cent, equivalent to net capital depreciation of N41 billion. Aggregate market value of all quoted equities at the NGX dropped from the week’s opening value of N25.477 trillion to close weekend at N25.436 trillion.

The All Share Index (ASI)-the value-based common index that tracks all share prices at the NGX, also declined correspondingly from its week’s opening index of 47,279.92 points to close weekend at 47,202.30 points.

There were 44 gainers and 31 losers last week compared with 42 gainers and 35 losers recorded in the previous week. A total of 81 equities remained unchanged last week compared with 79 equities recorded in the previous week. SCOA Nigeria recorded the highest gain, in percentage terms, of 42.4 per cent to close at N1.78 per share. RT Briscoe followed with a gain of 39.3 per cent to close at 39 kobo while Sunu Assurances Nigeria ranked third with a gain of 30 per cent to close at 39 kobo per share.

On the downside, Pharma-Deko recorded the highest loss of 16.67 per cent to close at N1.65. Okomu Oil Palm followed with a loss of 10 per cent to close at N127.80 while Juli declined by 9.9 per cent to close at 82 kobo per share.

Analysts at Cowry Asset Management said they expected the equities market to “mellow as corporates that opted for 60-day filing option may release their audited full-year 2021 results in the next two weeks; hence, we feel the new week will largely be quiet”.

Analysts at Cordros Securities said they expected “investors to take advantage of the moderation in the share prices to make a re-entry in dividend-paying stocks ahead of subsequent 2021 full-year earnings releases”.

“However, we believe investors will remain reluctant to leave gains in the market. As such, we expect intermittent profit-taking to continue due to uncertainties about the direction of yields in the fixed-income market. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings,” Cordros Securities stated in a weekend note to investors.

 

The Nigerian Exchange (NGX) will focus on five major areas in the year as the Exchange seeks to deepen access and attract new generation of investors to the market.

Chief Executive Officer, Nigerian Exchange (NGX), Mr. Temi Popoola, said the Exchange would drive its growth in 2022 by focusing on five strategic areas, including building on digital transformation, listings and delistings, technology, partnerships and sustainability.

He noted that last year was a historic for the Exchange as the defunct Nigerian Stock Exchange (NSE) completed its demutualisation process, following statutory approvals from the Securities and Exchange Commission and Corporate Affairs Commission (CAC).

Popoola said the NGX would seek to consolidate its historic status with a new verve of digitisation by creating innovative and automated access to the market while ensuring overall quality of listed companies and ease of capital raising process.

According to him, the Exchange would deploy strategic initiatives to attract financial technology (Fintech) firms to the stock market, including launching of a Nasdaq-style board for the listing of tech companies.

“Today, globally, there are lots of capital raising from tech companies. Our market can be a source to raise this capital. SEC has already taken the leadership. It will help to drive economic growth and mobilise capital from sectors of surplus to deficit,” Popoola said.

He added that the NGX would also accelerate the digitisation of its processes and operations to attract more investors, especially the millennials and youths, who are increasingly turning to alternative investment options.

He said the NGX would work to integrate the market to digital banks and other transactional channels in order to make the market a viable and accessible investment option to all investors.

With demutualisation, NSE transitioned into a non-operating holding company, Nigerian Exchange Group Plc. (NGX Group) with three subsidiaries – Nigerian Exchange Limited (NGX), the operating exchange; NGX Regulation Limited (NGX RegCo), the independent regulatory company; and NGX Real Estate Limited (NGX RelCo), the real estate company.

Popoola said that as the NGX walked through 2021, many of the benefits of the demutualisation were realised making the Exchange more agile and commercialised in its operations.

He highlighted that 2021 was a generally positive year for the NGX’s suite of indices as all but three of the indices ended the year with positive returns. NGX’s flagship index, NGX All Share Index returned 6.1 per cent driven by recovering corporate earnings and improved investor sentiments. The equity capitalization rose by 5.89 per cent or N1.24 trillion during the year. The NGX Oil and Gas Index was the best performing index with a return of 52.52 per cent driven by recovery in the global oil prices and stronger performances from oil and gas companies. This was closely followed by the NGX Growth Board Index which returned 28 per cent

“In the fixed income market, capitalization grew by 12.81 per cent from N17.50 trillion in 2020 to N19.74 trillion in 2021 driven majorly by FGN Bond issuances.  Last year  saw the groundbreaking listing of BUA Cement’s N115 billion bond, the largest corporate bond. We also saw the listing of LFZC Funding SPV’s N10 billion, the longest dated corporate bond. We also saw significant uptick in the value of turnover in the fixed income as turnover grew from N1.37 billion in 2020 to N3.52 billion in 2021. This represented an increase of 158.19 per cent in the value traded. This improvement could be attributed to investors taking advantage of rising rates in the fixed income market.

“NGX also made significant progress in its efforts on the introduction of Exchange Traded Derivatives. We witnessed the official launch of NG Clearing, Nigeria’s premier Central Clearing Counter Party (CCP). The Exchange also registered seven  contracts with the SEC ahead of the launch of Exchange Traded Derivatives,” Popoola said.

Some of achievements for the year also included listing of Bricklinks Africa, NGX Group and Ronchess Global Resources Plc by introduction on the Exchange; while the fixed income market saw corporate bond issuances by BUA Cement Plc , N115 billion; CardinalStone, N5 billion; Nova Merchant Bank, N10 billion and Coronation Merchant Bank, with N25 billion among others.

NGX grew the total value of securities borrowed or lent in 2021 to N513.10 million up from N95.18 million in 2020 and N340,000 in 2019.

The Exchange also received approval on amendments to the NGX Market Making Rules and relaunched the NGX Market Making Programme across the various listed asset classes.

 

Oando Plc has assured that it would release all delayed results before the end of this year as the energy solutions group works to regain its full compliance status.

In a regulatory filing, Oando noted that its interim and audited results were delayed as a result of the then indefinite suspension of the company’s 2018 annual general meeting (AGM) by the Securities and Exchange Commission (SEC) on June 10, 2019, thus preventing the company’s shareholders from appointing an auditor for its 2019 financials.

Oando resolved its dispute with the SEC in July 2021, and subsequently held its 42nd AGM in August 2021, where shareholders appointed Ernst & Young as auditors of its 2019 financials.

Consequent to the audit and filing of its 2019 financials, Oando explained that it would hold its 43rd AGM where it would propose that shareholders appoint an auditor for the filing of its 2020 and 2021 audited financial statements rather than having two separate AGMs for this purpose, all towards mitigating any further delays in the release of its financials.

“In this regard the company is confident that it will be in full compliance with its regulatory requirements regarding its annual financial statements and unaudited financial statements by the end of December 2022,” Oando stated.

Oando assured that it is working tirelessly with its external auditors to ensure that the 2019 audited financial statement is expeditiously finalised in accordance with the full requirements of the International Financial Reporting Standards (IFRS) and other subsequent results with a view to clear all backlog of delayed results by the end of this year.

“Irrespective of the unfortunate delays, which are for reasons clearly beyond our control, we are confident that the company will be in full compliance with its regulatory requirements regarding its annual financial statements and unaudited financial statements by the end of December 2022.

“We thank our esteemed stakeholders for their patience and support thus far and will keep the market abreast of any further developments in this matter,” Oando stated.

She noted that investors should take advantage of sectors such as commodities, financials, healthcare, consumer staples, energy, technology and real estate to build a balanced portfolio.

“ There are resilient stocks that thrive during inflation because of their underlying assets. Investors should build their portfolios with stocks of companies in the healthcare, energy, commodities, consumer staples, financials and real estate among others as a risk and reward trade off. We should not lose sight of mutual funds which is a collection of investment in different asset classes.

 

“ At Futureview, we design financial products to meet the demand of our array of customers with diverse investment objectives and risk tolerance. For instance, we have a product that targets Nigerians in diaspora. It is called Futureview Dollar Fund. We floated it along with Futureview Equity Fund. The two financial instruments hedge investment against inflation while they provide regular income.

 

“ It is settled in portfolio management that during high inflation rate, mutual funds provide an opportunities for diversification at every dollar level, sharing of investment expenses, economies of scale and operational efficiencies, ease of investing  in specialized market sectors and investment tracking, simple portfolio management, access to professional money managers and  low trading costs,” Nnodi.

 

Airtel Africa Plc recorded strong performance across key performance indicators in its third quarter as Nigeria, its largest market, paced up ahead of others to sustain impressive group performance.

Airtel Africa has presence in 14 countries in Africa, primarily in East Africa and Central and West Africa.

Key extracts of the nine-month results for the period ended December 31, 2021 showed that Airtel Africa’s net profit after tax rose from $261 million in December 2020 to $514 million in December 2021. Group revenue grew by 22.5 per cent from $2.85 billion to $3.49 billion. Operating  profit increased by 43.1 per cent from $800 million to $1.15 billion. Profit before tax jumped by  79.4 per cent from $482 million in December 2020 to $864 million in December 2021.

Top-line analysis indicated that voice revenue grew by 13.6 per cent from $1.54 billion to $1.75 billion. Data revenue rode on the back of increased data users to $1.13 billion in December 2021, 33.9 per cent on $842 million posted in December 2020. Mobile money revenue also grew by 39.6 per cent from $291 million to $406 million. Other revenues increased by 19.9 per cent from $255 million to $306 million.

The underlying customer base showed that the group continued to expand across its businesses. Total customer base rose by 5.8 per cent from 118.9 million users to 125.8 million users. Data users grew by 11.1 per cent from 40.6 million to 45.1 million while mobile money users increased by 19.6 per cent from 21.5 million to 25.7 million users.

A breakdown showed that Nigeria, Airtel Africa’s largest market, outperformed the group with Nigeria’s revenue rising by 21.5 per cent from $1.13 billion to $1.37 billion. Operating profit increased by 30.4 per cent from $431 million to $562 million. Total customer base in Nigeria however dipped marginally by 4.7 per cent from 44.4 million to 42.4 million. Nigeria’s data customer base meanwhile increased slightly by 0.7 per cent from 18.8 million to 19.0 million users.  Nigeria’s customer base was affected by the National Identity Number (NIN)/SIM regulations in Nigeria.

Chief Executive Officer, Airtel Africa Plc, Segun Ogunsanya, said a strong third quarter performance contributed to the pleasing nine-month financial performance across all key metrics.

“Operationally we have continued to execute on our network and distribution expansion plans, driving continued strong growth in ARPUs across voice, data and mobile money. We have also seen further improvement in our customer growth trends for the Group with Nigeria returning to strong customer growth after a period affected by the implementation of new ‘know your customer’ requirements, posting 1.9 million net additions in the third quarter, taking total Group customer additions to 3.1 million.

“I am particularly pleased with developments in Nigeria, where in November we received approval in principle for both a payment service bank (mobile money) licence and a super-agent licence. We are now working closely with the Central Bank to meet all its conditions to receive the final operating licences and commence operations. This will enable us to expand our digital financial products and reach the millions of Nigerians that do not have access to traditional financial services.

“We continued to strengthen our balance sheet, with our leverage ratio now 1.4 times underlying EBITDA, thanks both to continued increases in operating cash flow delivery and to over $550m of cash that has now been received from minority investments into our mobile money business.

“We will continue to invest in expanding and evolving our platform to further deepen both financial and digital inclusion across Africa. I continue to see huge growth potential across voice, data and mobile money and our strategy is delivering against this opportunity.

“Our sustained investments in both network and distribution expansion will help to ensure that both the communities and economies across our footprint will continue to benefit from increased and affordable connectivity and financial inclusion. We are committed to continue to improve the delivery of our services to our customers, with sustainability at the heart of our continued purpose to transform lives across Africa,” Osunsanya said.

Managing Director, Futureview Asset Management, Ughochi Nnodi has offered investment tips for building an efficient portfolio that can generate competitive returns despite prevailing inflationary environment.

After  eight months of steady deceleration in headline inflation, there was a marginal spike in the last December rate from 15.4 per cent in November 2021 to 15.63 per cent in December 2021. The increase in headlines inflation which was attributed to currency depreciation and the liquidity challenges in the forex market was expected to impact negatively on all investment outlets.

Nnodi explained that investors could optimise the tough operating environment by investing in assets that hedge against inflation.

According to her, there are resilient sectors that outperform inflation and generate alpha returns.

She noted that investors should take advantage of sectors such as commodities, financials, healthcare, consumer staples, energy, technology and real estate to build a balanced portfolio. “There are resilient stocks that thrive during inflation because of their underlying assets. Investors should build their portfolios with stocks of companies in the healthcare, energy, commodities, consumer staples, financials and real estate among others as a risk and reward trade off,’’ she added.

 

 

We should not lose sight of mutual funds which is a collection of investment in different asset classes.

 

“ At Futureview, we design financial products to meet the demand of our array of customers with diverse investment objectives and risk tolerance. For instance, we have a product that targets Nigerians in diaspora. It is called Futureview Dollar Fund. We floated it along with Futureview Equity Fund. The two financial instruments hedge investment against inflation while they provide regular income.

 

“ It is settled in portfolio management that during high inflation rate, mutual funds provide an opportunities for diversification at every dollar level, sharing of investment expenses, economies of scale and operational efficiencies, ease of investing  in specialized market sectors and investment tracking, simple portfolio management, access to professional money managers and  low trading costs,” Nnodi.

 

Stockbroking firms need to be innovative in product development and marketing while leveraging cutting edge technologies in order to achieve sustainable growth in the current operating environment.

Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Sam Onukwue, at the weekend advised dealing member firms to review their operational models, create new products and deploy technology to upscale operations and skills.

According to him, the Nigerian capital market has been moderated by the inclement operating environment, characterised by impacts of COVID-19 and its variants on corporate earnings, misalignment of monetary and fiscal policies, high production cost and low purchasing power of consumers, currency devaluation, forex scarcity and high inflationary pressure among others.

He said the current investment climate required innovative approach that meets the needs of clients.

He urged dealing members to deepen their research and development and create innovative products, especially to attract the millennials and Generation Z in order to widen customer base and ensure business continuity.

He pointed out the need for deployment of modern technology to enhance operational efficiency noting that COVID-19 pandemic has institutionalised digital transformation for every business.

He noted that millennials and Generation Z engage via digital channels as they do virtually everything on their smartphones.

“Our members have realized the imperative of digital transformation of our operations. With the impacts of COVID-19 on our business environment, demutualisation of the former Nigerian Stock Exchange to Nigerian Exchange Group ( NGX) Plc and tough operating environment, our operational models have to be reviewed.

“We must create more innovative financial products that attract millennials and Generation Z. They are digital natives that do almost everything on smartphones. Our business models must take this critical class of investors into consideration. We need to deepen our research and development base to be on top of the latest development in the global financial market. We appeal to our regulators to address the observed impediments to full digitalisation of our market such as the issue of identity management,” Onukwue said.

He noted that many investors have not recovered from the meltdown of 2008, urging dealing firms to sustain efforts at rekindling their confidence towards  bringing  them fully back to the market through investor education.

“As a trade group, ASHON shall continue to join hands with other market operators, platforms and regulators to ensure harmonious relationships among the stakeholders in the capital market ecosystem. The capital market remains a veritable platform for wealth creation in any economy. We shall continue to appeal to the government to leverage the market to raise medium and long term funds to fix the economy as there is a nexus between the economy and the market. This is why enabling environment is key,” Onukwue said.

 

Notore Chemical Industries Plc has announced a group revenue growth of 43 per cent to N27.02 billion for the 15-month period December 31, 2021.

Group Managing Director, Notore Chemical Industries Plc, Mr. Ohis Ohiwerei said the company in the year 2021 changed its accounting date from September 30 to December 31 as part of the measures taken to strategically reposition the company for revenue growth and profitability.

During the 15-month period ended December 31 2021, Notore recorded group revenue of N27.02 billion, an increase of 43 per cent over the N18.79 billion recorded in the prior financial year ended September 30 2020.

Ohiwerei said 2021 was a year of rebuilding and repositioning Notore to further deliver on its promise to champion the African green revolution. During this period, the company carried out a turnaround maintenance programme (TAM) which led to a 102-day plant shut down. The 15-month prior to December 31, 2021 was a challenging period for the company occasioned by the negative global impact of COVID-19 disruptions.

He said the pandei caused TAM to extend over a prolonged period with consequential effect on production output but nevertheless, Notore has improved its facilities’ reliability, and has been well-positioned for growth in the year.

He stated that the company is optimising its operations and expects a major upturn in its production output in the on-going financial year.

He noted that achieving upturn in its operations will not only lead to significant increases in the Company’s cash flows from operations, but also substantial increases in revenues, which is major key to returning the Company to profitability.

“The production and sale of Notore NPK fertiliser into the domestic market is also expected to contribute significantly to the company’s revenue growth and profitability going forward,” Ohiwerei said.

He stressed that as part of the company’s efforts to further diversify the its revenue stream, boost profitability and consolidate customers’ loyalty, Notore is expanding its product offering by going into rice production and that two rice pilot programs carried out recently are a prelude to its planned launch of the rice product line.

On the outlook for the year, Ohiwerei said the demand for urea and compound fertiliser in Nigeria and the West African sub-regional markets remains robust and is expected to continue to grow.

“With fertiliser consumption still far below the 200kg per hectare recommended by Food and Agriculture Organisation, it is evident that both the domestic and regional fertiliser markets are yet to reach their full potential and guarantees the sale of all the fertiliser produced by the Company in the on-going year.

“With the Federal Government’s strong and decisive policy focus on agriculture as one of the keys to unlock the diversification of the Nigerian economy, Notore is well positioned to take full advantage of this policy in the execution of its business strategy going forward,” Ohiwerei said.

 

PZ Cussons Nigeria Plc at the weekend distributed N992.62 million as cash dividends for the 2021 business year as shareholders commended the board and management of the consumer goods company.

Shareholders received a dividend per share of 25 koko, 150 per cent increase on a dividend per share of 10 kobo paid for the previous business year.

At the 73rd annual general meeting held at Ilupeju, Lagos, shareholders had approved the audited report and accounts of the company for the 2021 business year.

The report showed that turnover increased by 23 per cent to N82.578 billion in 2021 from the previous year of N66.99 billion, resulting in 143 per cent increase in profit before taxation against a loss of   N7.939 billion recorded in 2020

The report showed that growth has been broad based reflecting in all the business units and many of PZ Cussons’ leading brands with solid performance in hygiene, home and personal care. HPZ continued to grow sales by 24 per cent ahead of the previous year.

The directors’ report showed that in supply chain space, the business is transforming supply chain to further unlock value, localization of raw material sourcing, blending flexibility and delivery of new product development initiatives. We will continue to toe the line of sustainability in tune with best global practices.

On human resource development, the report indicated that the business remained committed to ensuring the right level of employee engagement and motivation abound within the company thus further encouraging their passion for excellence and resilience.

Directors of the company said people transformation would continue to be a key strategic priority ever evolving noting that the business is pursuing a new strategy that provides clearer insight into changing consumer and shopper habits as well as total business transformation thus building brands for life for today and future generations.

Shareholders applauded the company for a commendable performance, expressing hopes for sustainable growth of revenue and profitability.

 

The capital market can leverage the benefits of asset tokenisation to stimulate capital formation and drive market penetration, a report by professional services company PricewaterhouseCoopers (PwC) Nigeria has said.

The report said although asset tokenisation is still a relatively nascent concept, compared to other traditional means of raising funds in the financial markets, it is gradually changing the way capital is raised and investment products are developed and distributed.

Asset tokenisation is the process of transforming an underlying asset into another unit of a digitised or physical asset called tokens. Tokenisation helps to convert an asset into a digital unit that can be managed without a central intermediary through blockchain technology.

PwC in the report also said asset tokenisation can be leveraged in accelerating financial inclusion and inclusive growth through the capital market.

Asset tokenisation helps to break complex assets into a simple form or unit that can be easily exchanged for cash or assets.

It can help individuals to acquire smaller units of these large and complex assets (real or virtual) in a cost-efficient manner, which they may otherwise not be able to acquire, while enabling issuers raise more capital for project financing.

While asset tokenisation and cryptocurrency are both in digital forms, which can be created, transferred (traded) or stored, there are some important differences between the two concepts.

For instance, cryptocurrencies are digital currency or payment options from a blockchain such as Bitcoin or Dogecoin which are created in a decentralised way, whereas asset tokens are exclusively digital assets from an existing blockchain that derive their value from the underlying virtual or real assets.

In essence, asset tokens are digital assets that are backed by the economic value of the underlying assets. Cryptocurrencies are also virtual like tokenised assets but do not necessarily derive value from underlying assets.

PwC in the report made available to The Nation said asset tokenisation has the potential to revolutionise the dynamics of the securities market, with a potentially huge impact on asset valuation and transaction settlement, when compared to traditional assets.

The report authored by PwC experts including Partner, Dr. Andrew S. Nevin; Senior Manager, Adebayo Araoye; Partner, Omobolanle Adekoya, listed some of the potential benefits to the securities market to include product innovation, risk diversification and management, and market liquidity.

Others are market penetration, lower costs and transaction efficiency, transparency, and trade settlement, among others.

For instance, the report said asset tokenisation can aid the development of new hybrid financial products combining the characteristics of both traditional and digital assets. As an alternative asset class, it also provides portfolio diversification options for investors in the capital market.

Besides, new financial products created by asset tokenization, the reeport said, will boost the flow of capital into the capital market particularly from increased retail investor participation.

Increased retail participation means lower income investor groups also benefit greatly as they can participate in investment options that would ordinarily not appeal to them due to the size of capital required, market lot size, minimum order quantity, etc.

It also said asset tokenisation has relatively lower cost implications compared to other traditional means of raising funds from investors such as IPOs.

Cost implications, as used here, not only refer to sunk costs of mobilising the funds, but include other costs such as trade settlement and clearing, registration, documentation and filing requirements etc.

PwC also said with blockchain technology, transactions on tokenised assets can easily be monitored by participants in real-time.

Investors across the globe will have access to tokenised assets issued through blockchain technology thereby improving foreign portfolio investments especially in frontier and emerging economies where there is a capital deficit.

Describing the recent launch of Nigeria’s digital currency, the e-Naira, by the Central Bank of Nigeria (CBN) as “a laudable development,” PwC said the creation of a digital currency via blockchain should provide a solid platform for asset tokenisation to thrive in Nigeria.

This is so especially against the backdrop of the Securities and Exchange Commission (SEC) pronouncement, in September 2020, on the regulation of digital assets.

One of the issues that worry most investors about digital assets or currencies is the safety or security of their investment. But the report said Nigeria, through regulators of capital and money markets, can respond to this concern by deploying appropriate security structures and frameworks that have been adopted in countries where the digital economy is well regulated.

“The asset tokenisation process can be used to dispose of some idle government assets to retail investors, it can also be used to commercialise some public organisations. This may help the government to raise funds that can be channeled to other growth-enhancing projects.

Furthermore, given the huge capital deficit for infrastructural projects and limited investment instruments in the nation’s capital market, Nigeria must develop appropriate technologies that will enable the use of asset tokenisation to channel funds from the surplus unit (local and foreign investors) to the deficit unit of the nation’s economy. This may boost capital formation and drive sustainable growth in the long run,” PwC said.

It, however, pointed out that the adoption of asset tokenisation is supported by the growing number of smartphones users in Nigeria. It cited a report by the GSMA Intelligence, which put Nigeria’s smartphone adoption rate at 36 per cent in 2018, at 53 million users, and projected to grow to 144 million users by 2025.

“The growth potential of the mobile technology space can be leveraged to stimulate development in asset tokenisation. The recent approval of the Fifth Generation Network, otherwise known as 5G, for the nation should enhance the speed and ease the use of digital technology and, by extension, asset tokenisation in the capital market,” the report said.

Concluding, PwC said “overall, capital market stakeholders should begin to explore the opportunities that asset tokenisation presents to Nigeria’s capital market and the economy at large, drawing on learnings from other jurisdictions that have successfully integrated their capital market into the digital economy.

“It is also important to collaborate with experienced partners to help navigate the complexities of integrating the capital markets into the evolving digital financial market globally.”