Business News Nigeria

System challenges hamper financial sector growth – Expert

The operation of the financial sector has been hampered by key challenges in the system. Head, Financial Markets FSS2020 Secretariat, Dr. Charles Ohamara stated this at the 23rd CBN seminar for Business Editors and Finance Correspondents in Sokoto State.

He listed these challenges to include:

  • Inadequate skills for financial products development (Capital Market);
  • Inadequate collaboration of regulators and stakeholders;
  • Unavailability of investible fund for long term financial products;
  • Increasing cost of transactions and operations;
  • Weak risk management and low level of card usage on POS and high ATM usage for cash transactions.

Others are physical insecurity and prevalence of financial fraud, low level of Financial literacy and inclusion, low acceptability of mobile money at merchant locations, non-existence of sound collateral management, inadequate legal and regulatory framework for the commodities market and the NIFC, unwillingness of Private companies to go public, inadequate Foreign Direct Investment and non-existence of an Integrated Credit Scoring System

The Director stated that the Financial Services Strategy 2020 (FSS2020) Organize a capital market sensitization workshop for targeted companies, collaborate with SEC and relevant stakeholders to develop schemes that will encourage companies to get listed on the floor of the stock exchange and strengthen the legal framework for foreign direct investment to ensure the full participation of Nigerians.

In order to realize the FSS2020 goals, he said that Pension Commission (PENCOM) has authorised financing options to broaden the FGN securities market in order to sustain the development of other segments of the bond market and support Government’s financing needs through the introducing of new products.

The investment according to him must be fully guaranteed by Irrevocable Standing Payment Orders (ISPOs) or external guarantees by eligible banks or development finance institutions.

“Pension Fund Assets can be invested in infrastructure projects through eligible bonds and debt securities. The Bonds and debt instruments issued to finance infrastructure projects shall have a robust credit enhancement,” he said. FSS2020 is currently collaborating with CBN, NDIC, SEC NSE, FIRS, DMO, NCX and FRC to increase the tempo in transforming the Financial Markets in Nigeria.

“FSS2020 supports the identification of relevant skill gaps in the financial markets sector for appropriate training programs to address the gaps in the financial markets.This presentation re-states the interest of the FSS2020 Secretariat in the development of the Corporate Bond Market and the Derivatives Market in Nigeria.

In the private sector, corporate bonds are not often considered an option by many companies in funding expansion and innovation. FSS2020 has commenced regular engagement with relevant institutions and stakeholders to fast-track and align strategies to support the development of the financial markets in Nigeria,” he stated further.

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Ihesiulo Grace

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