Managing Director/CEO of Heritage Bank Plc, Ifie Sekibo, has said that market formation framework is the key to optimally exploit Nigeria’s precious metal and solid minerals endowments.
He disclosed this during a webinar organised by the Securities and Exchange Commission (SEC) in collaboration with the Federal Ministry of Mines and Steel Development with the theme, “Financing the Solid Minerals Sector through the Capital Market and the Critical Role of Commodity Exchanges.”
Sekibo explained that a fully established market formation process would lead to having a Corporation as an integrated solid mineral an institution like NNPC which allows the collateralisation of assets that banks can rely on alternative funding options.
According to him, this will guarantee other creative ways of raising funds for financing commercial activities relating to solid minerals and viable projects along its value chain.
Sekibo who was represented by the Divisional Head, Strategy and Business Solutions, of the Bank, Olusegun Akanji, said for the sector to be viable, it requires lots of converged government interventions because for any development-focused sector to kick-off around the world, it needs government intervention to lay the foundation for the private sector and funders to step in and pool their resources.
“Once, we can collateralise these assets, whether they are under the ground or being determined, you use different instruments to bring liquidity into them.
Then investors will follow up once we have established there is enough they can explore,” the MD stated.
He further suggested that finance sector regulators need to expand their Prudential Guidelines to accommodate the instruments such that precious metal-backed or solid minerals backed assets could qualify as part of the computation of liquidity ratios.
“Once banks start injecting their resources, customers would certainly follow that trend. You can start arranging for sophisticated solutions like bonds, bullion-backed assets and pension notes.
Again, banks will have to be poised to hold the funding that comes from this sector; that way, they can open new transactional frontiers either locally or internationally.
“At the base of this, are the issues of pricing and integrity of the market.
Once banks play in that sector and we have a government institution like the NNPC type to hold all this documentations, it would be very easy to establish price discovery on an ongoing basis. This will in turn attract international funders, hedge funds and retail investors.
Today, we have retail bonds in the same way; we can have gold-backed or any of the solid mineral assets where retail investors can put in the funds,” Sekibo explained.