The Securities & Exchange Commission (SEC) has admonished Credit Rating Agencies (CRAs) operating in Nigeria to focus on Investors’ protection in all their dealings, services and activities within the Capital Market.
This was contained in the goodwill message delivered on behalf of Mallam Lamido Yuguda, the Director General of the Commission, by its Head of Monitoring Department, Mr. Adamu Sambo at the Inaugural Edition of DataPro’s Annual Webinar on Credit Rating Imperatives for Issuers and Investors held on Thursday, 14th October, 2021.
The Webinar, attended by participants from different parts of the world, was hosted by DataPro, a technology-driven Credit Rating Agency and the Association of Issuing Houses of Nigeria (AIHN).
The program, which was staged to sensitize the Investing Public on the activities of Credit Rating Agencies within the Capital Market and also espouse the value proposition of Rating Reports in bridging the information asymmetry existing between Capital Market Operators (CMOs) and the Investing Public, had various Stakeholders within the Nigerian economy in attendance.
However, the recession was short-lived with an economic rebound in Q4 2020 which was however below pre-pandemic projections. The Central Banks across the world reportedly cut interest rate 207 times in 2020. In the face of low interest rate, the National Governments recorded an increase of 36% in Sovereign Debt issuance in 2020. Corporate Bond Issuance also increased by 66% in 2020 as against 2019.
In his welcome address, the Managing Director and Chief Executive Officer of DataPro, Mr. Abimbola Adeseyoju called for greater socialisation of the crucial role played by Credit Rating Agencies in the efficient allocation of capital and resources within the economy.
According to Mr. Adeseyoju, DataPro will henceforth be charting a new course in the Credit Rating Industry in Nigeria and focusing on the way forward as well as on how Investors and Issuers alike can adapt to the new normal and drive economic growth and development through the various securities, products and services available in the Nigerian Debt Market.
In the keynote address, delivered on behalf of Mr. Bola Onadele Koko, the Chief Executive Officer of FMDQ Group by Ms. Tumi Sekoni the Managing Director of FMDQ Securities Exchange Limited, titled “Galvanising the Capacity of the Nigerian Debt Capital Market”, it was opined that the COVID-19 Pandemic negatively affected the new wave of globalisation with massive decline in World Trade, Foreign Direct Investment (FDI) and net travel leading to a 3% traction on Global GDP in 2020.
However, the recession was short-lived with an economic rebound in Q4 2020 which was however below pre-pandemic projections. The Central Banks across the world reportedly cut interest rate 207 times in 2020. In the face of low interest rate, the National Governments recorded an increase of 36% in Sovereign Debt issuance in 2020. Corporate Bond Issuance also increased by 66% in 2020 as against 2019.
Moreover, it was noted that the Debt Capital Market has the capacity to transform Nigeria from building infrastructure, driving agriculture, inspiring industrialization to providing employment opportunities all of which are embedded in the mission of the FMDQ to empower markets towards delivering economic prosperity.
Furthermore, Market Debt, Product & Investment Diversification, Enabling environment and Operating efficiency were stated as the factors that will serve as tailwind for the development of the Nigerian capital market.
On the untapped potential of the Nigerian debt market to provide long term capital financing, it was established that the FMDQ Exchange is committed to galvanising the capacity of the Nigerian Debt Capital Market, beyond being an organiser for the debt capital market by ensuring transparency, liquidity and diversity.’
The FMDQ boss ended the keynote address by encouraging all Stakeholders to be motivated by the progress made in the debt capital market value chain and jointly seek for ways to improve the liquidity and diversity of the Nigerian Capital market.
Other goodwill messages were delivered by Mrs. Tinuade Awe, the CEO of NGX Regulation; Mr. Philip Oduoza, the Chairman of Nova Merchant Bank Limited and Mr. Akin Akeredolu-Ale, the Managing Director of Lagos Commodities & Futures Exchange (LCFE), who all emphasised on the crucial role Credit Rating Agencies play within the Market and praised the initiative of DataPro and AIHN to organise the Webinar.
The Panel Discussion, themed “Accelerating the Nigerian Debt Market: What’s Next?”, was presided over by Mr. Ike Chioke, the Chairman of the Association of Issuing Houses of Nigeria (AIHN) and Managing Director of Afrinvest. Other panelists were: Mrs. Funke Okoya, the Executive Director in Nova Merchant Bank Limited; Mr. Oladele Adeoye, Executive Director and Chief Rating Officer, DataPro Limited and Mr. Jacques Piekarski, the Chief Financial Officer and Executive Director , BUA Cement who represented Alhaji Kabir Rabiu, the Executive Director of BUA Group.
Mr. Piekarski, in his contribution, noted that the BUA Bond, the largest ever issued within the market and oversubscribed to the tune of 300%, which was Rated by DataPro, got the Group into the Debt Market. He also stated that the outcome was an eye-opener about the potentials and possibilities within the market as well as a pointer to other areas of improvement within the Group.
The panel discussants also covered areas such as the challenges faced in the Capital Market and recommended areas of improvement. Additionally, discussions about the chances of the SMEs getting Rated to attract capital were expressed. The role of Supervisory & Regulatory Agencies in the ease of doing business within the Capital Market was also mentioned with suggestions towards improvements. The critical success factors needed by Issuers and how Rating Reports can open doors for Businesses & Corporates and act as catalyst for Investment in States in Nigeria were fully analysed and dissected.
While speaking on the possibility of SME’s getting an Investment Rating Grade, Mr. Oladele Adeoye, the Chief Rating Officer of DataPro, mentioned that although size is important, other parameters such as Diversity of Earnings, Earning profiles, Cashflow and Corporate Governance are major considerations to focus on by the entities.
According to him, both qualitative and quantitative information are considered in a Rating evaluation. He went further to say that Companies and Entities should not only seek for Rating Reports when transactions are involved but to consider it as Corporate Strategy to aid better understanding of their fundamentals.
Mrs. Funke Okoya on her part mentioned that the low interest rate and capital market diversification are favourable terms for Issuers and Investors to explore in the market. In terms of Regulation and Supervision in the Capital Market, she commented that the stance of the new leadership at SEC and globally is the adoption of “Regulation as Service” philosophy. She noted that the philosophy, going forward, will help improve the Compliance Culture in the market and further align market realities with rules and regulations.
For Mr. Jacques Piekarski, a platform such as the one created by DataPro and AIHN should be upheld so as to enable all stakeholders get informed and acquainted with trends, patterns and emerging issues. He commented on the challenges faced by Issuers when it comes to dealing with the Regulators and advocated for definite turn-around-time for applications and readiness of information and documentation.
Speaking further, Mr. Pierkarski said the debt market can accelerate productivity in the system by controlling the interest rate, streamlining the debt issuing process and relaxing the requirement for accessing fund. He concluded by citing some of the critical success factors that could be advantageous to Issuers such as Financial Performance, Operational efficiency, Good governance and Risk Management.
In bringing the Webinar to a close, DataPro unveiled two products offering of a Rebranded and New Look Rating Report and a Rating Guide Dashboard for Investors.
According to Dr. Wence Nwoga, a member of the DataPro Rating Committee who did the unveiling, the company is taking full advantage of New Technologies such as Artificial Intelligence (AI), Machine Leaning and Big Data to enhance its Core Values of Speed, Innovation, Reliability, Transparency and Strict Governance.
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