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SEC DG to FG: Embrace non-interest capital market for greater FX inflows

SEC DG to FG: Embrace non-interest capital market for greater FX inflows
December 07
12:00 2023

Lamido Yuguda, director-general of the Securities and Exchange Commission (SEC), says Nigeria can attract  huge foreign exchange inflows, if opportunities in the non-interest capital market are explored.

Yuguda spoke on Wednesday at the first annual SEC Nigeria-Islamic Financial Services Board (IFSB) international forum on non-interest capital market (NICM) held in Abuja.

According to SEC, the NICM “is a segment of the capital market that should play a pivotal role in any economy, both as an alternative source of finance and as an investment outlet”.

The director-general said the non-interest (Islamic) capital market in Nigeria has undergone transformational growth and is now an integral part of the country’s financial framework.

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He cited Sukuk as a major part of the non-interest finance that has contributed to the infrastructural development and financial inclusion in the country.

“Sukuks are good structure for infrastructure financing, as they clear the issuer’s balance sheet of debt, given that the investors own the assets to be financed and share in the gains from such asset,” Yuguda said.

“This is really an attractive capital market instrument to be explored by both corporates and governments at all levels. 

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“The non-interest capital markets have a huge role to play in the current economic program being pursued by the administration of His Excellency, President Bola Tinubu. 

“We are of the believe that the country’s economy cannot reach its target size without a lot of investments in critical infrastructure. Indeed, with the high debt-service to revenue ratio, sukuks present a viable alternative to other modes of financing.

“Nigeria has the potential to join the league of global Islamic finance jurisdictions if we could address issues, such as inadequate awareness, regulatory harmonisation, and enactment of legislation that enhance legal certainty and clarity similar to what prevails within the conventional financial architecture. 

“Also, Nigeria has a lot to gain from growing the non-interest segment of its financial sector. An important area is the potential foreign exchange inflows from international investors to be attracted by sukuks. 

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“With the current foreign exchange liquidity challenges facing the country, an opportunity to attract greater foreign exchange inflows must be explored using the non-interest finance market.

“International investors are also attracted to environmental and climate related initiatives. As such, there is a desirability for our subsequent Sukuk issuances to look at this as an important area.”

Since the unification of all trading windows into the investors’ and exporters’ (I&E) window — the official FX market in Nigeria has been faced with high levels of volatility.

The Central Bank of Nigeria (CBN) had introduced several policies in a bid to stabilise the market

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The bank, on October 12, lifted the ban on the 43 items restricted from accessing forex.

The decision, according to the regulator, was part of sustained efforts to boost FX market liquidity.

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