Nigeria: Deconstructing the SEC’s time to market initiative

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The Securities and Exchange Commission (SEC) has implemented various initiatives to reduce the time to market with the aim of improving the efficiency and attractiveness of the Nigerian capital market, promote economic growth and development, writes JOSEPH INOKOTONG.

THE Securities and Exchange Commission (SEC) of Nigeria is the apex regulator in the capital market. Many factors such as lack of integrity in the market; environmental constraints; lack of good corporate governance culture and absence of a well-funded regulator may constrain regulation. The SEC initiates policies, monitors the financial health of market operators to ensure that only fit and proper participants are in the market.

One of the policies the SEC has evolved to maintain the vibrancy of the Nigerian capital market is the Time to Market (TTM) initiative.

Time to market (TTM) refers to the length of time it takes for a company to complete the capital raising process and lists its shares on a stock exchange. Time to market is crucial in the context of capital market development as it can impact the efficiency and attractiveness of the market.

A shorter time to market can benefit capital market development in several ways like increased liquidity as faster listing allows companies to access capital more quickly, increasing liquidity in the market. It improves investor confidence in that efficient listing processes can enhance investor trust and confidence in the market.

It enhances competitiveness and better allocation of resources. A shorter time to market can make a jurisdiction more attractive to companies, investors, promoting competition and growth just as faster capital raising enables companies to allocate resources more efficiently, driving economic growth.

Conversely, a longer time to market can lead to delayed access to capital because companies may face delays in accessing necessary funds, hindering growth and development. It may increase costs, leading to reduction in investor’s interest. Prolonged listing processes can result in higher costs for companies, reducing the attractiveness of the market, and inefficient processes can deter investors, leading to reduced market activity and development.

Recognizing these variables, the SEC in Nigeria has implemented various initiatives to reduce time to market. These including, streamlined registration processes; introduction of an electronic filing system, and enhanced regulatory frameworks.

These efforts aim at improving the efficiency and attractiveness of the Nigerian capital market, promoting economic growth and development.

The Commission has made several efforts in recent times to reduce the concept of Time to Market (TTM) in the Nigerian capital market. Here, TTM refers to the time it takes for a new issue to be approved and made available and subscribed to by investors.

Some of the key initiatives undertaken include, introduction of electronic offering (e-PO) System. The Commission in 2019 issued a new rule on electronic Public Offering (e-PO) system which streamlines the process of issuing new securities. This allows for faster processing of applications by automating various steps, reducing manual paperwork, and facilitating broader participation. The implementation of e-PO is part of a broader effort to make the market more efficient and reduce time to market.

Digitisation and automation of processes – The SEC has been actively digitizing its operations, including the submission and processing of applications for securities registration, to reduce delays caused by manual processes. This involved the use of electronic platforms for document submissions and approvals, which not only speeds up the process but also improves transparency.

Regulatory reforms – The Commission has undertaken regulatory reforms aimed at simplifying and streamlining the approval processes. These reforms include updating rules and regulations to reflect current market realities and adopting international best practices that enhance efficiency. For instance, the SEC introduced checklist review for registration of fixed income securities, thereby shortening the review and approval timelines.

In a bid to build capacity and train all stakeholders, the Commission launched and conducted a targeted bi-annual training for Issuing Houses to enhance time to market and fast-track review of applications.

Framework on Banking Sector Recapitalisation Programme: In June 2024, the Commission issued a framework on banking sector recapitalization programme, which outlines the guidelines and procedures banks are required to follow to raise capital during the recapitalization period to ensure a smooth, transparent, and efficient capital raising process. This is to serve as a comprehensive guide for Banks/Holding Companies and market participants on the requirements of the Commission for capital raising and mergers and acquisitions as well as assist the participants navigate the recapitalisation programme effectively to ensure proper and timely review and approval of the transactions.

The major highlight of the framework is the requirement for an e-offering platform to be provided by a Securities Exchange for the capital raising exercise, which allows for end-to-end offering, subscription and payment process. This is based on the SEC’s resolution to enhance time-to-market, efficiency, transparency and integrity of the recapitalisation programme. The use of e-offering platform eliminates multiple identities, and reduces the potential for unclaimed dividends among other benefits.

Also, a joint team comprising the SEC, CBN and NDIC was set up to facilitate the recapitalisation programme, especially in areas of capital verification, which is a pre-requisite for allotment clearance.

To address the issue of Time to market, the assigned each CMO/SRO to specific desk officers to ensure prompt attention. It now ensures that all applications are filed online. The Department collaborates with other sister regulatory agencies to ensure early responses when carrying out due diligence, and has made all regulatory information available on the website.

Also, there has been timely conduct of trainings and examinations for potential sponsored individuals. Registration interviews are now conducted virtually; training and development of staff of the Department, and equally initiated the process of acquisition of a real-time surveillance tool for the market.

Reiterating these laudable accomplishments via Time to Market, the SEC assured all stakeholders of improved efficiency for economic development.

The Director General of the Securities and Exchange Commission, Dr. Emomotimi Agama said that the Commission has implemented various initiatives to reduce time to market with the aim of improving the efficiency and attractiveness of the Nigerian capital market, promote economic growth and development.

In an interview recently, the SEC DG highlighted the initiatives to include streamlined registration processes, introduction of an electronic filing system and enhanced regulatory frameworks among others, emphasising that shorter time to market can benefit capital market development in several ways like increased liquidity which will lead to faster listing allowing companies to access capital more quickly, increased liquidity in the market and enable companies to allocate resources more efficiently, thereby driving economic growth.

“Shorter time to market will also improve investor confidence because when the listing processes are efficient, it can enhance investor trust and confidence in the market. A shorter time to market can make a jurisdiction more attractive to companies and investors, promoting competition and growth.

“The Commission has been actively digitizing its operations, including the submission and processing of applications for securities registration, to reduce delays caused by manual processes. This involved the use of electronic platforms for document submissions and approvals, which not only speeds up the process but also improves transparency. We have undertaken regulatory reforms aimed at simplifying and streamlining the approval processes. These reforms include updating rules and regulations to reflect current market realities and adopting international best practices that enhance efficiency. For instance, the Commission introduced checklist review for registration of fixed income securities, thereby shortening the review and approval timelines. The Commission launched and conducted a targeted bi-annual training for Issuing Houses to enhance time to market and fast-track review of applications”. Dr. Agama stated.

He further disclosed that in June 2024, the Commission issued a framework on banking sector recapitalization programme, which outlines the guidelines and procedures banks are required to follow to raise capital during the recapitalization period to ensure a smooth, transparent, and efficient capital raising process which is serving as a comprehensive guide for Banks/Holding Companies and market participants on the requirements of the Commission for capital raising and mergers and acquisitions as well as assist the participants navigate the recapitalisation programme effectively to ensure proper and timely review and approval of the transactions.

He stressed that “The major highlight of the framework is the requirement for an e-offering platform to be provided by a Securities Exchange for the capital raising exercise, which allows for end-to-end offering, subscription and payment process”.

The SEC’s DG expressed satisfaction with the efforts so far made and assured that his management team would continue to do its utmost in unlocking the full potentials of the capital market, in alliance with the Renewed Hope Agenda of the President Bola Ahmed Tinubu led administration.

Dr. Agama added, “We will continue to do our utmost best to ensure that the capital market is well positioned to drive economic development. One thing I and my team promise is that Time to Market will be properly dealt with. Approvals for issuances will be done swiftly so that when companies desire to come to the market, they know exactly what time approvals will be given. We are also going to guide in the process of submitting their applications, which is now done electronically. If you want to do an offer, the application will be submitted electronically. This helps with the process of review and feedback”.