Chairman, Nigerian Exchange Group (NGX Group) Plc, Alhaji Umaru Kwairanga, is a thoroughbred finance expert and a notable boardroom leader, with more than three decades’ cognate experience in capital market, banking, pensions, manufacturing and commercial sectors. A Fellow of the Institute of Directors (IoD), Certified Pension Institute of Nigeria (CPIN) and Chartered Institute of Stockbrokers of Nigeria (CIS), Kwairanga sits on the boards of many national institutions and several companies. In this interview with Deputy Group Business Editor Taofik Salako, he speaks on emerging macroeconomic issues, national developmental and financial sectors, among others.
How do you see the capital market response to recent government’s policy changes?
The capital market has shown strong enthusiasm towards the policies of President Bola Tinubu going by the positive performance recorded since inauguration.The market’s performance has been very impressive and I am hopeful that it will continue on the upward trajectory.This is because we have a new president that understands the economy and financial markets very well and this is evident in the policies he introduced these early days into the administration.The measures taken recently by the government, though painful in the short-term, would have positive effects in the long term that will allow Nigeria to reach its potential. It is like deciding to forego nursing a serious wound with non-prescription drugs in favour of a surgical procedure that will bring about a long-lasting healing.
The remarkable upsurge in our market index, a feat unparalleled in recent times, serves as an indication of the market’s enthusiastic embrace of the new government and its early policies.The NGX All Share Index, market capitalisation and turnover, have witnessed significant growth. NGX Group and its stakeholders are, therefore, pleased with the new administration and pledge our support for its efforts to advance Nigeria.
What are the expectations of the capital market from the new government?
On the market’s expectations from President Tinubu’s administration, I will like to emphasise the importance of adopting friendly policies that not only generate wealth for Nigerians but also create opportunities for the government to raise capital for developmental initiatives. The president should look at the revitalisation of the government’s privatisation policy, with the potential benefits of introducing private sector efficiency to various government enterprises, which in turn, would open up the investments opportunities in them to Nigerians and thus bring the critical mass of Nigerians’ potential to bear on national development. Nigeria has several idle or less optimal assets that the government can bring to top productivity through privatisation.This will not improve government’s national accounts position by blocking loopholes and transferring costs, but it will also enable the government to raise much-needed capital for provision of essential infrastructure and services.
For instance, in furtherance of the reforms in the oil and gas sector, we are hopeful that the Tinubu administration will expedite actions on the planned initial public offering (IPO) of the Nigeria National Petroleum Company (NNPC) Limited. Such IPO and eventual listing will have huge transformative impact on the nation. It will enable the nation to unlock the full potential of the oil company and direct such gains to general improvements of living standards.
Furthermore, consistent and faithful implementation of announced policies is critical to improving businesses and individuals’ ability to plan and thrive. The Nigerian capital market had witnessed a dearth of foreign participation in recent years, seeing turnover from foreign portfolio investors dropping to as low as four per cent, plunging Nigerian stocks to record lows.The liberalisation of the foreign exchange (forex) market had brought in some measurable foreign portfolio investments (FPIs) through the Investors and Exporters (I & E) window. Proper implementation of these policies will encourage FPIs to come back as we have very attractive valuations.
I am delighted that the president’s manifesto highlights the capital market as a lever of his economic plans and we expect it to remain as a key anchor of the economy under his government. As a critical stakeholder, we want the government to also prioritise the growth of the nation’s capital market through fiscal and monetary policies that incentivise savings and capital formation, including amenable tax regimes, encouragement of public quotation and onboarding the capital market infrastructure for implementation of intervention schemes. We look forward to further initiatives in the areas of Ease f Doing Business as these will have global impact on the preference for the market.
We are also confident that the government will put the right pegs in right holes in terms of key appointments to help drive its policies. That is also very important as the quality of the decision-making depends on not only the institutional framework, but also the personality. We are quite hopeful about this government and look forward to working with the government in moving our country forward.
How do you assess the performance of the NGX Group?
The NGX Group has continued to demonstrate resilience, despite the challenges in the macroeconomic environment. For instance, in 2022, we achieved a 10.3 per cent increase in gross earnings to N7.5 billion, as we continue to implement our strategic plans to drive the top-line and enhance profitability. Achieving an efficient capital mix and broadening our access to capital remain fundamental to our mission. The board will continue to assist the management team in addressing long-term risks, strengthening the global NGX brand, and assessing progress towards our goal of being Africa’s preferred exchange hub.
What efforts are you making to drive financial inclusion, especially in the light of global trend in alternative finance?
The Nigerian Exchange Group has been at the forefront of efforts to achieve financial inclusion. NGX Group adopts a multi-dimensional approach to closing the financial literacy and inclusion gap through market development, the introduction of innovative products, social media engagement, as well as Corporate Sustainability and Responsibility (CSR) initiatives, among other impactful initiatives. Our essay competition is targeted at deepening students’ financial literacy and knowledge of the capital market for years. Through our subsidiary, NGX, we also run a programme called the X-Tour which hosts students from various secondary and tertiary institutions to a tour of the Exchange during which they are taught the rudiments of the capital market. NGX also encourages its branches to organise enlightenment programmes on the capital market in schools, markets, NYSC Orientation camps, ministries, departments and agencies of government. There is, for instance, an ongoing enlightenment programme for staff of the Federal Road Safety Corp (FRSC) in different parts of the country.
These efforts are also complemented by the various initiatives of our regulator, the Securities and Exchange Commission (SEC), the Chartered Institute of Stockbrokers (CIS), Central Bank of Nigeria (CBN) and our trading licence holders. It may interest you to know that plans are at an advanced stage to introduce capital market studies as a subject in both secondary and tertiary institutions.
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These efforts also to cover non-interest finance as it is one of the most attractive sectors for a good number of investors. The NGX is playing a leading role in the development of the non-interest or alternative finance market. We have an index that tracks that segment of the market and allows investors to see the intrinsic values in compliant stocks. We are a critical stakeholder in most initiatives in this segment of the market. I must commend the efforts of firms like Finmal Finance Services Limited and banks such as Jaiz Bank, Taj Bank and Lotus Bank, which have been pioneers in introducing non-interest finance products and services into the capital market. The response has been great from investors.
To summarise, financial inclusion can only be attained when there is awareness. There are products to meet investors’ needs and ease of access to such products and services. NGX Group and the capital market as a whole have been leading in efforts to ensure financial inclusion.
Nigeria faces arduous task of huge infrastructural gap and low revenue, how can the capital market help in achieving national goals?
I am a champion of government, both at the federal and state levels, leveraging the capital market to fund capital projects and long-term programmes. It guarantees a better match as the capital market is meant for long-term funding while bank loans are short term in nature. Capital market funding is also usually cheaper than bank facilities and more transparent. The argument sometimes has been that the capital market does not have the depth to provide the quantum of funds that government requires but I believe that has been proved to be wrong by the oversubscription recorded in offers such as the five tranches of the Federal Government of Nigeria (FGN) Sovereign Sukuk for road infrastructure and the Lagos State N500 billion bond issuance programme.
Specifically, my firm, Finmal Finance Services Limited, was involved in packaging Sukuk that raised almost N50 billion for two sub-nationals last year and we are looking forward to several more this year. From whatever perspective you look at it, the Nigerian capital market is well-positioned to support the government in realising the national developmental agenda. The market has the depth, the expertise and the willingness to assist government tackle its fiscal and liquidity challenges in a timely and transparent manner.
What is the importance of inclusion of non-interest options in government schemes?
I think it is very important as there is a growing awareness of the advantages of non- interest finance, not just from a religious angle, but also from ethical and returns perspective. From practical experience, I know that several investors will not participate in any government scheme that compromises their religious and ethical beliefs. Therefore, it is important that in formulating such schemes, provision is made for citizens who will only accept non-interest models. That is the way to ensure all-inclusive participation and success of such schemes. When you take a holistic view of national development, it helps to unleash the full potential of the nation and bring everybody on board in the wealth creation and distribution. There are so many ways that the government can utilise the non-interest finance models to significantly reduce or eradicate poverty, distribute wealth down to the lowest of the social strata and reduce the pressure on national revenue through accumulated borrowings and interests. So, given the growth we’ve seen overtime and the success of government’s non-interest issuances, I think government should include the non-interest option as an alternative in its funding and intervention programmes.