FMDQ 2017 Highlights and Outlook for 2018
As a market organiser and self-regulatory organisation with the mandate to develop the Nigerian debt capital, foreign exchange (FX) and derivatives markets to global standards, FMDQ OTC Securities Exchange (FMDQ or the OTC Exchange) set out in 2017 to innovate and position the markets and invariably, the Nigerian economy, for growth amidst the recessionary trends and other economic headwinds which marked activities within the year. For FMDQ, this saw the redefinition of the OTC Exchange’s role in the Nigerian financial markets landscape to include unlocking capital for infrastructural development in support of the Nigerian Economic Recovery and Growth Plan, financial markets diplomacy with both local and international stakeholders and increased economic development advocacy with key regulator, in addition to its marker organising role. The year also saw the birth and nurturing of strategic initiatives in the aforementioned areas, with key support from and collaboration with market stakeholders and regulators, towards making the Nigerian financial markets globally competitive.
Every month in 2017 was marked by a significant activity/event, ranging from the launching and implementation of key activities and initiatives, to the making of history in the Nigerian financial markets. Some of these included but were not limited to:
Quotation of the ₦35.00 Billion Access Bank PLC Commercial Paper Notes: FMDQ commenced the year with the commemoration of the successful quotation of the Access Bank PLC ₦8.45 billion Series 1, ₦4.22 billion Series 2 and ₦22.33 billion Series 3 Commercial Paper (CP) Notes under its ₦100.00 billion CP Programme on the OTC Exchange. This marked the beginning of a year which saw significant activity in the CP market as corporates made a deliberate move to tap the debt market to raise short-term finance to support their business operations.
Partnership with S&P Dow Jones Indices: FMDQ, in February, formalised its partnership with S&P Dow Jones Indices (SPDJI), the largest global resource for essential index-based concepts, data and research, and home to iconic financial market indicators (e.g. the S&P 500® and the Dow Jones Industrial Average®), through the signing of a memorandum of understanding (MoU) for the development and publication of co-branded fixed income indices in the Nigerian financial market. This move was a conscious effort by the OTC Exchange to provide investors with a consistent, credible and objective measure for the performance of their investments in the Nigerian fixed income markets. The co-branded indices will serve as acceptable benchmarks for the fixed income market and provide transparent and credible information to the investing public and other persons with interest in the Nigerian financial market.
Listing of the Federal Republic of Nigeria Eurobond on FMDQ: In what was a historic event, and has been described as a momentous occasion, the Federal Republic of Nigeria (FRN), through the Debt Management Office (DMO), in March, listed, for the first time ever, its Eurobond on a domestic Exchange.
The $1.00 billion Notes (Eurobond) under the FRN’s $1.00 billion Global Medium-Term Note Programme was listed on FMDQ and a prestigious and one-of-a-kind Ceremony was held in honour of the FRN to mark the remarkable achievement. This most significant feat was achieved following a series of strategic engagements that spanned over three (3) years between the DMO and FMDQ, as well as some other key stakeholders, on the importance of listing the sovereign’s Eurobonds locally. This listing underscored the importance of developing the local markets, in line with the drive to make them globally competitive, as effective avenues for bridging the long-term financing gaps towards economic development.
Listing of the Pioneer Exchange Traded Fund on FMDQ: FMDQ, also in March, welcomed the pioneer listing of an exchange traded fund (ETF) on its platform – The Vetiva S&P Nigerian Sovereign Bond Exchange Traded Fund. The listing of this ETF on FMDQ platform, validates the OTC Exchange’s goal of bringing the Nigerian fixed income market operations under a single governance structure.
Launch of the Nigerian Autonomous Foreign Exchange Fixing (NAFEX): Following the introduction of the Investors’ & Exporters’ FX Window (I&E FX Window) by the Central Bank of Nigeria (CBN), aimed at setting out a single and autonomous FX market structure for investors’ and exporters’ activities in the Nigerian FX market, towards maintaining FX market stability whilst attracting and retaining foreign capital into the economy, FMDQ developed and launched the NAFEX – the Nigerian Autonomous Foreign Exchange Fixing in April, to serve as the reference rate for activities in the I&E FX Window. The NAFEX was developed to represent Spot FX market rates in the I&E FX Window and support appropriate benchmarking and facilitation of derivatives activities in the I&E FX Window. To stay up to date with the trends in the I&E FX Window including Spot FX & NAFEX rates and turnover figures, please register on FMDQ’s e-Markets Portal. Email firstname.lastname@example.org for further details.
Securities and Exchange Commission Approves FMDQ Sukuk Listing Rules: The month of April was again marked with significance as the Securities and Exchange Commission (SEC) conveyed its approval of the FMDQ Sukuk Listing Rules. This approval followed a series of stakeholder engagements between the SEC and FMDQ, with a view to ascertaining the preparedness of the OTC Exchange towards developing the Nigerian Non-interest Capital Market.
Leadership Changes at FMDQ: Following the retirement of Dr. (Mrs.) Sarah Alade, OON, who until then was the Deputy Governor, Economic Policy Directorate, representing the CBN, as Chairman of the Board of Directors (Board) of FMDQ, the Company welcomed Dr. Okwu Joseph Nnanna, Deputy Governor in charge of Financial System Stability at the CBN, in the month of April, as Chairman. The Board also announced the shareholders’ ratification of the appointment of Mr. Kennedy Uzoka, Group Managing Director/CEO of United Bank of Africa PLC, and Mr. Dapo Akisanya, Managing Director/CEO, AXA Mansard Pensions Limited; as well as the retirement of Mr. Yinka Sanni, the Chief Executive Officer of Stanbic IBTC Holdings PLC. A befitting send-forth Ceremony was hosted by the Company, in October, to honour the retired Chairman, Dr. Alade, and six (6) other retired Directors for their meritorious service to FMDQ.
Award for Most Innovative in Financial Markets: In recognition of the contributions made by FMDQ to the development of the Nigerian financial markets, the OTC Exchange was honored to win the ‘Most Innovative in Financial Markets’ Award at the first BusinessDay Top 25 Most Innovative Companies & Institutions in Nigeria Awards 2017 held in April. This Award validated FMDQ’s efforts, being an innovation-driven OTC Exchange, availing the markets unique opportunities and aligning its operations and activities with international standards, in transforming the Nigerian financial markets through its “GOLD” (Global Competitiveness, Operational Excellence, Liquid and Diverse) Agenda.
Publication of Weekly Turnover in Investors’ & Exporters’ FX Window: Following the introduction of the I&E FX Window by the CBN, FMDQ, in validation of its market transparency agenda and alignment with global standards for an efficient, vibrant and liquid FX market in Nigeria, commenced the publication of the weekly turnover figures for the I&E FX Window on its website in the month of May. The information was positively welcomed by both local and international market participants seeking improved transparency in the Nigerian FX market. The I&E FX Window turnover is published on a weekly basis on FMDQ’s website and historical weekly turnover figures for this Window are published on FMDQ’s Markets Portal. Email email@example.com for further details.
Launch of the FX Corporate Clients Onboarding Process: Following the CBN’s drive to restore confidence in the Nigerian FX market and consequently boost the liquidity via additional inflows into the market, the apex bank issued a directive to all Authorised Dealers mandating that they execute all FX trades with their corporate clients only through the FMDQ-advised Trading & Surveillance System. FMDQ, having the same transparency and growth objectives for the Nigerian FX market, launched the corporate institutions’ onboarding process in June, to ensure the seamless integration of both local and international corporate institutions onto the Thomson Reuters FX Trading and Auction Systems. Details of the FX Onboarding process for local and international corporate institutions, along with the associated application forms are available on FMDQ’s website at www.fmdqotc.com.
Market Development Appreciation in Honour of Dr. Abraham Nwankwo (former Director-General, DMO): In appreciation of the support and efforts towards the growth of the Nigerian bond market, and the economy in general, FMDQ, in July, brought together key financial market stakeholders, friends and well-wishers, to celebrate Dr. Abraham Nwankwo on his retirement from the DMO (July 2007 – June 2017). The OTC Exchange took the opportunity to welcome the incoming DirectorGeneral, Ms. Patience Oniha, who was there to celebrate Dr. Nwankwo and provide assurances of the DMO’s continued support and interest in the development of Nigerian debt capital markets.
Listing of the Pioneer Infrastructure Debt Fund in Nigeria and Sub-Saharan Africa: In yet another remarkable and historic feat, FMDQ, also in July, welcomed the listing of the pioneer Infrastructure Debt Fund on the OTC Exchange. Chapel Hill Denham Management Limited, following the approval of the SEC, registered and established the ₦200.00 billion Nigeria Infrastructure Debt Fund (NIDF) Issuance Programme, and subsequently issued the first series under this Programme – Series I 49,450,000 Units of ₦101.20 each, on FMDQ’s platform. The NDIF was the first-ever listed infrastructure debt fund in Nigeria (and Sub-Saharan Africa) and aims to enable investors access infrastructure as an asset class, while providing the benefit of predictable returns available from longdated infrastructure debt investments.
Launch of the FMDQ Investor Protection Fund: In compliance with the provisions of Part XIV of the Investments and Securities Act 2007 and to provide a secure and credible platform supported by global best practices, as well as serve as a catalyst for sustaining investor confidence in the Nigerian financial markets, FMDQ launched its Investor Protection Fund. The Fund would compensate investors who suffer pecuniary losses arising from insolvency, bankruptcy, or negligence of a Dealing Member of the OTC Exchange, as well as defalcation committed by a Dealing Member or any of its Directors, officers, employees, or representatives in relation to securities, money or any property entrusted to, received, or deemed received by the Dealing Member in the course of its capital market activities.
Launch of the FMDQ Clients’ Fixed Income Trading, Reporting & Surveillance System: 2017 saw the launching of key proprietary market systems with the aim to deliver improved market connectivity in the Nigerian fixed income market for clients, as well as effective oversight for select financial market regulators over the activities of their supervisees in said market. Consequently, in September, FMDQ launched the PenDealer System, its Clients’ Fixed Income Trading, Reporting and Surveillance System. The PenDealer System currently provides a seamless avenue for Pension Fund Operators to engage in activities in the fixed income market with banks via the System, whilst providing the National Pension Commission a means to maintain adequate oversight over the activities of its supervisees, the Pension Fund Operators, thereby improving market integrity and bolstering investor confidence.
The 2017 Nigerian Debt Capital Markets Conference & Awards: FMDQ brought together a wide audience of local and international financial markets participants/subject-matter experts with varying focuses and interests in the Nigerian and global financial markets space, at the 2017 Nigerian Debt Capital Markets Conference & Awards, themed: Positioning for Growth, held in September. Furthermore, the OTC Exchange went on to recognise and present awards to market participants/key stakeholders in the Nigerian DCM who had performed creditably in relation to primary market activities, over the past two (2) years (September 2015 – August 2017). Further details on the Conference & Awards can be found on the Conference website – www.fmdqconferences.com.
Launch of the Sustainable Finance Sub-Committee and Maiden Issuers/Investors Roundtable: Stemming from the growing global recognition which sustainability plays in strengthening financial stability and supporting overall economic growth, the Debt Capital Markets Development Project 2020/25 launched the Sustainable Finance Sub-Committee (SFS), and organised, in collaboration with the Climate Bonds Initiative, a Roundtable Session on Sustainable Finance development, still within the month of September. The SFS, which will serve to be a catalyst for propelling the growth and development of sustainable finance in Nigeria, will focus on areas that range from Impact Investing, Green Bonds, Microfinance, Credits for Sustainable Projects to Active Ownership, and Financial Inclusion, amongst others.
Commercial Paper Issuances Maintain Steam with N160.00 Billion Worth of Commercial Paper Programmes Quotations: The month of October saw key activities in the CP quotations space on the OTC Exchange, wherein the CP Programmes of Lafarge Africa PLC ₦60.00 billion and First City Monument Bank Limited ₦100.00 billion were registered on FMDQ, while the Wema Bank PLC ₦3.41 billion Series 1 and ₦13.62 billion Series 2 CP Notes under its ₦50.00 CP Issuance Programme were quoted on the OTC Exchange.
Commencement of Private Companies’ Bonds Noting Service: The month of November saw another first in the nation’s debt capital markets (DCM) wherein the OTC Exchange commenced its Noting Service for Private Companies’ Bonds (PCB Noting Service). The PCB Noting Service is an initiative that aims to prescribe minimum standards and provide due diligence in the market for private long-term debt securities (bonds), bringing these debt securities under appropriate governance, eliminating information asymmetry and promoting credibility in the market for private companies’ debt securities.
The FMDQ PCB Noting Service offers a robust review and due diligence process for the noting of PCBs and restricts the availability of all the key information on the activities of the noted PCBs, to only qualified institutions via an FMDQ restricted portal – the FMDQ PCB Portal. Some of the benefits of the FMDQ PCB Noting Service include, but are not limited to, unmatched transparency, unique visibility, broad qualified institutional investor base and efficient noting process.
Listing of the Pioneer Diaspora Bond and latest Eurobonds on FMDQ: In the month of December, the FRN, through the DMO, listed its first Diaspora Bond on the OTC Exchange. The FRN Diaspora Bond – $300.00 million 5.625% Diaspora Bond due 2022 issued in June 2017, along with the two (2) tranches of the FRN Eurobonds – $1.50 billion 6.500% Notes due 2027 and $1.50 billion 7.625% Notes due 2047 under its $4.5 billion Global Medium-Term Note Programme Eurobonds, were listed on the OTC Exchange to promote, among others, visibility for the issues and financial inclusion.
In addition to its market development activities, over the course of the year, the OTC Exchange admitted the listings of seven (7) bonds with a total value of N1,598.35 billion. The OTC Exchange also admitted the quotations of thirty-three (33) CPs with a total value of N152.35 billion. By their admission to the FMDQ platform, these securities gain access to the full complement of the unsurpassed FMDQ Listings and Quotations service, which includes, but is not limited to, improved secondary market liquidity, efficient listings/quotations process, unprecedented transparency and information disclosure, global visibility and improved network effects.
2017, despite some challenging conditions faced in the markets during some periods in the year, proved to be encouraging in terms of market development, and has, no doubt, set the pace for a significantly positive outlook for 2018. FMDQ remains very optimistic about the possibilities of the Nigerian markets and looks ahead to the coming year 2018 with much eagerness and expectation. The OTC Exchange recognises the potential of fully-functional DCM and financial markets at large, and will remain steadfast in innovating and providing efficient services and infrastructure, as may be necessary, to support issuers, investors, government and their agencies and other corporate businesses at large, towards achieving an economy that would support sustainable development and directly impact the citizenry. FMDQ has some key market development initiatives the markets (local and international) can excitedly look forward to. Chief amongst these initiatives include, but are not limited to:
Sustainable Finance development
Clearing and settlement solutions
Expansion of the derivatives markets
New products development
Financial markets education and capacity building
Proprietary Market System launch