The dedication to optimizing cost efficiency within the Nigerian capital market is a paramount focus for Mr. Temi Popoola, the Chief Executive Officer of the Nigerian Exchange Limited (NGX). In a recent presentation at the 2023 MTN Capital Markets Day, centered around the theme “Executing for Sustainable Growth,” Popoola underscored NGX’s commitment to collaboratively drive improvements with intermediaries. The goal is to create a more cost-effective and efficient investment environment that benefits both issuers and investors.
According to Popoola, the total cost incurred by an investor throughout the investment process, from initiation to exit, can amount to as much as 2%. He emphasized the need to reduce this cost, making it more conducive for market intermediaries to engage in longer-term strategies. Popoola stated, “We are navigating this landscape by engaging our market intermediaries to explore how we can ease up these immediate expenses and shift perspectives to a longer-term focus.”
Technology stands out as a key enabler in this endeavor, with NGX actively seeking ways to leverage it for reducing barriers to entry. Popoola acknowledged the current prohibitive nature of new issuances in the market, comparing it to the relative ease of obtaining a loan from a bank. Assuring issuers of ongoing efforts to enhance the accessibility of the market, he remarked, “Issuers can be assured we are working assiduously to improve that conundrum.”
In recommending solutions to further deepen the capital markets, the NGX CEO emphasized the pivotal role of intentional government advocacy and policymaking. Drawing on historical examples, Popoola highlighted how transformative shifts in the capital market often stem from government policies. Notable instances include the banking sector and pension reforms of 2004, which had a profound impact on market growth.
Popoola explained, “Today, the financial services sector contributes over 60% of turnover in the equities market. This would have been difficult to realize if not for that foundational policy that drove banks to recapitalize via the capital market.” Additionally, he pointed out the significant role played by pension funds as contributors to liquidity in secondary markets. The CEO emphasized that these instances underscore the potential for the government to be a driving force in the capital market, acting as a catalyst for overall economic development.
The need for intentional and strategic government interventions was a recurring theme in Popoola’s presentation. He urged policymakers to consider the broader implications of their decisions, recognizing the far-reaching effects that well-crafted policies can have on market dynamics and, by extension, the national economy. By drawing parallels with past successes, Popoola made a compelling case for the government’s proactive role in shaping the trajectory of the capital market.
As the NGX CEO outlined the challenges and opportunities within the current landscape, the message was clear: collaboration, technological innovation, and government support are essential components for fostering sustainable growth in the Nigerian capital market. The commitment to reducing costs, enhancing accessibility, and promoting long-term strategies reflects a strategic vision aimed at creating a more robust and dynamic financial ecosystem for all stakeholders involved.
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