The Bankers’ Committee of the Central Bank of Nigeria on Tuesday agreed to remove all major impediments in the bond market, saying the move was necessary to facilitate the growth and development of that segment of the economy.
This was the high point of its 313th meeting of the committee, which was held at the CBN headquarters in Abuja.
The meeting, which was attended by the managing directors of all the Deposit Money Banks, was declared open by the Governor of the CBN, Mr. Lamido Sanusi.
At the end of the meeting, the managing directors of Access Bank Plc, Mr. Aigboje Aig-Imoukhuede; Zenith Bank Plc, Mr. Godwin Emefiele; and Stanbic IBTC Bank Limited, Mr. Yinka Sanni, addressed journalists on some of the decisions taken.
They were accompanied by the Acting Director, Banking Supervision Department, CBN, Mr. Benjamin Fakunle; and Director, Corporate Communications Department, CBN Mr. Ugo Okoroafor.
Sanni said the need to develop the bond market was borne out of the committee’s desire to help the country tap into the available pool of funds for development purposes.
Some of the impediments, according to him, are liquidity problems and the lack of sustainability of the tax regime.
He said, “The committee, for some time now, has been seeking ways to encourage growth and development in that sector of the financial market largely so that the country can tap into the available pool of funds for development purposes.
“And so, the committee discussed and debated on how to continue to remove the impediments on the path of development of that sector.
“The committee agreed to continue to look for ways to engender and encourage growth of the sector, and one of the ways we are seeking is the secondary stock market to encourage the bond market.”
Sanni added, “One of such impediments, which the committee is seeking to remove, is liquidity. Liquidity in the sense that in a market, people that buy and sell want to be sure that anytime they show up in that market place, there will be buyers and sellers, and that helps price discovery and give them the assurance that their money is well invested.
“We are also advocating for the sustenance of the tax regime, especially as it relates to long-term bonds. The country needs to build infrastructure, and those things will be built by long-term bonds, and they can only be built with long-term money.
“Now, investors that buy under this category should be able to get assurances of positive and beneficial tax treatment on their investments.”
To drive this process, the committee said it had put in place a Financial Market Dealers’ Exchange that will be inaugurated on August 1.
The FMDQ, which has already secured the approval of the Security and Exchange Commission, is an Over-the-Counter regulatory organisation that will ensure market liquidity and sophistication.
Shedding more light on the operation of the FMDQ, Aig-Imoukhuede said, “The Bankers’ Committee, a few months ago, actually supported the Financial Markets Dealers’ Association towards sponsoring an OTC regulatory organisation.
“The good news today is having obtained its registration from the Securities and Exchange Commission a few months ago, a lot of work has been done and this body is about to commence business.
“The meeting was briefed on the development to date about the fact that market rules are on the final stages of drafting and will be sent to the SEC for review and approval, and on the fact that market infrastructure are being aggregated.
“Also important is that the body has finalised the appointment of a chief executive officer, and we will be launching sometime in August of this year.
“This is an extremely important component of the financial market that has grown quite exponentially in terms of size, but we need to match that growth of size with appropriate market infrastructure and market regulation, and appropriate market sophistication.”