By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-Nigeria’s central securities clearing system Limited (CSCS) has said 73 percent (73%) of share certificates in the Nigerian capital market (NCM) has been dematerialised.
Kyari Bukar, managing director (MD) Nigeria’s CSCS disclosed this in Lagos Nigeria at a bi-monthly interactive forum of the finance correspondents’ association of Nigeria (FICAN).
The theme of the bimonthly forum is “The Role of the Central Securities Clearing System in the Nation’s Financial System”.
‘’73 percent of share certificates in the country had been dematerialised and the rest are still in certificate form; in spite of this, there is still the need to enlighten people about the dematerialisation of share certificates,’’ he said.
According to the CSCS chief, before 1998, only share certificates were being handled which created room for market manipulation and fraudulent practices.
‘’ The existence of the pre-CSCS market was fraught with one long transaction cycles, a lot of fraud related to certificates clowning, certificates been lost or invalidated via one form or another. People handled paper certificates; so they can actually play around the market and take advantage of this. All these malpractices were reduced or completely eliminated as a result of the advent of the CSCS to the market,’’ Bukar said.
He affirmed that the efficiency of the market is enhanced by having the process dematerialised or have an electronic book entry format by the introduction of the CSCS.
Bukar further affirmed that about 1,500 customers visit the CSCS customer service to have their complaints resolved.
On the transaction cost analysis (TCA) initiative of the Nigerian stock exchange, the CSCS chief said this was aimed at knowing the total cost of security investments.
According to him, the initiative was developed to compare the Nigerian market with foreign markets.
Bukar said the TCA was to guide foreign investors and portfolio investors in their investment decisions and assist them to allocate their resources wisely in the market.
‘’The introduction of the TCA had helped to determine how free and open the market was, as well as the state of the economy,’’ he said.
The Nigeria’s CSCS boss said that a study conducted showed that the TCA was not only useful in determining the explicit cost, which includes investors’ payment to brokers, CSCS and NSE, but also the intrinsic cost which they are liable to.
He said the establishment of the West African Capital Markets Integration Council (WACMIC) was to avail investors in the region more opportunities to invest in more securities
‘’For example the Nigerian capital market is around $100 billion, the French West African speaking market about $129 billion and Ghana about $20 billion, when you get those markets together it could amount to around $300 billion, so there would be more opportunities investing in more securities than you would if you remained a separate country,’’ he said.
Bukar said investors would have an integrated and common method in going in and out of those markets, ‘’so the integration process that we have started is going to be in phases, the first is to ensure that brokers go into another market, but they need to meet the minimum standard and once this is done, then you have the common pass porting methodology. You have a sponsored access process, meaning when a stockbroker from Ghana wants to come to Nigeria to buy shares, the broker will go through another one in Nigeria who will provide access from his system, I’m not going to be his broker, because he is coming in as a broker. It’s the risk management system of my system that will transact with him, so he can actually place his order directly,’’ he said.
