By Chinenye Anuforo and Chinwendu Obienyi
The Nigerian Stock Exchange (NSE) recently launched a series of reforms aimed at elevating the capital market as the most liquid and efficient in the Africa. Here are few of them:
X-Academy
As part of efforts to boost capital market literacy, the NSE launched a knowledge platform, X-Academy, to offer bespoke capital market training programmes, to equip individuals who will lead and transform businesses for sustainable growth.
Speaking at the launch, Its CEO.Mr. Oscar Onyema, said: “X-Academy would help in strengthening financial literacy and enhance investment in the capital market. It will offer a wide range of courses geared towards bridging the knowledge gap of dealing members, issuers, investors and the general public about products and services of the capital market”.
He stated that the establishment of X-Academy is consistent with NSE tradition of pioneering far-reaching innovations within the Nigerian capital market. Onyema added that the product feeds directly into the National Financial Inclusion Strategy (NFIS) which was launched by the Federal Government of Nigeria in 2012 to reduce the number of adult Nigerians who were financially excluded, from 46.3 per cent in 2010 to 20 per cent by 2020.
According to Onyema, X-Academy would provide individuals and businesses with a robust and effective array of training solutions that would ensure participants were abreast with trends in the rapidly evolving financial markets. “As a socially responsible organisation devoted to enhancing the fortunes of Nigerians and our investors, we are confident that participants of programmes offered by X-Academy will be better positioned to make informed financial decisions,” he said.
Also commenting on the launch of the X-Academy, the acting Head, Human Resources, NSE, Mrs. Chinelo Chukwuma-Onwujei, said the exchange will continue to enter into strategic alliances and collaborations with domestic and international institutes and professional associations in developing and deploying structured programmes aimed at creating value for individuals and businesses while delivering superior performance.
“We will also continue to leverage on our affiliations and membership of international bodies to promote the programmes of the Academy and attract participants from across the globe to subscribe to them and further project X-Academy as the learning destination of choice for capital market programmes and financial literacy education,” she said.
The programmes offered by X-Academy are facilitated by seasoned and certified subject matter experts with both domestic and international exposure to practical experience.
These programmes are built around six broad themes, which include: Listings and Trading on the NSE, Products of the NSE, Market Data and Technology, Financial Education, Corporate Governance, and Risk Management and Compliance. Between June 12 and 15, 2017, NSE via the X-Academy, held a workshop to train corporate lawyers and risk managers on the Legal and Risk Aspects of Derivatives and Counter Party Clearing (CCP)Transactions in preparation for the launch of derivatives in Nigeria. The training was designed to provide participants with a broader understanding of the concept of derivatives from the two main perspectives of Exchange Traded Derivatives (ETDs) and over-the-counter (OTC) derivatives.
NSE Data Centre
The NSE recently opened a highly available data center in Lagos, built to Tier III redundancy standards.
The facility will serve both financial market operators and regular colocation customers, with offsite backup in a partner Tier III facility located 25km away.
According to NSE, the project cost NGN 500m ($1.39m). The facility was commissioned by the Minister of Science and Technology, Dr. Ogbonnaya Onu, who was present at the opening ceremony. “Technology remains one of the drivers of growth for any economy and am impressed that the Exchange is at the forefront of adoption while partnering with other Nigerian companies,” Onu said.
The new data center should enable NSE to expand its reach and better compete with other trading platforms across Africa.
“It comes with real time monitoring of active devices, N+1 resistance of all critical components, 99.982 percent availability, uninterrupted power supply and market leading cloud hosting capabilities,” said Ade Bajomo, executive director for Market Operations and Technology at NSE.
“At the Exchange, we strive to maintain 100 percent availability of all market platforms and have been very successful in this quest. Currently, 90 percent of all trades are also done outside the Exchange, in a fully automated manner and the criticality of the data center is key for market confidence and growth. Our Data Center can currently host 50 clients but can scale up rapidly with demand.”
Bajomo added that power usage remained a significant aspect of data center operating expenses, and that NSE chose the facility components and cooling strategy carefully to conserve energy.”
Exchange Traded Derivatives (ETDs)
To expand its various investment instruments, the Exchange concluded arrangements to introduce the Exchange Traded Derivatives (ETDs).
Speaking at the training programme on legal and risk aspects of derivatives and central counter-party clearing, NSE’s 1st Vice President, Abimbola Ogunbanjo, said the launch the ETDs into the market will enhance investors with the ability to differentiate risk which would lead to exponential growth in the frontiers of the financial market, noting that derivatives hold great prospects for the capital market.
He pointed out that with impressive yearly growth of about 24 per cent over the last decade and about €457 trillion of notional amount outstanding in 2014, no other class of financial instrument has experienced as much innovation from its embryonic development to a fully developed and respected financial market than derivatives.
“We believe that Nigeria’s ETD initiative will eventually develop into a robust market place that can support our growth ambitions as a nation, using South Africa as an example of Africa’s first derivative market,” Ogunbanjo said.
He said the Exchange has taken a bold step towards providing a strong capacity base in anticipation of the launch of ETDs and to create a viable, efficient, innovative and risk absorbent derivatives market.
According to him, given the derivatives market’s global nature, users can trade around the clock and make use of derivatives that offer exposure to almost any “underlying” asset class across various global markets.
He, however, underscored the importance of effective trading and regulatory frameworks and adequate human capacity, noting that the imperatives for a truly functional derivatives market are safety, effective risk mitigation, innovation and efficiency.
He pointed out that risks such as counter-party risks, operational risks, liquidity risks, systemic and legal risks could be implicit in even the most developed markets citing the global financial crisis between 2007 and 2010 that was mainly fuelled by delinquent underlying assets.
“Such is the attendant risk that may rear its head in a derivative market, which can have far reaching impact on various global markets and economies.
It is imperative that we learn from our past mistakes and ensure the proper construct for risk mitigation is adequately addressed via mechanisms like counter-party clearing (CCP) transactions”