By Chukwuma Umeorah
The ongoing discourse around digital assets and their transformative potential continues to be a front-burner issue for organisations worldwide, including key players in Nigeria’s capital market. Stakeholders in Nigeria’s financial and investment landscape are increasingly embracing innovative solutions that not only create more opportunities and foster inclusion but also contribute immensely to the nation’s economic future.
One such solution gaining traction is ‘tokenisation,’ which the Ministry of Finance Incorporated (MOFI) has been at the forefront, advocating for its potential to revolutionise asset management and funding mechanisms through Nigeria’s capital market.
Tokenisation refers to the conversion of physical or financial assets into digital tokens, which can then be traded securely using blockchain technology. From high-value assets like real estate to securities and public enterprises, tokenisation allows investors to purchase fractional shares, breaking down traditional barriers to investment. By expanding ownership and access to such assets, MOFI believes Nigeria can tap into untapped resources and bolster the nation’s economic growth.
During the recently concluded World Investor Week 2024, MOFI’s leadership emphasised the strategic importance of tokenising assets to unlock liquidity, transparency, and accessibility; key factors that could reshape investment opportunities in the country. This innovative approach, they believe, is integral to ensuring that MOFI remains at the cutting edge of asset management while opening the door to new investment flows, both domestically and internationally.
MOFI’s Managing Director and CEO, Dr. Armstrong Takang, represented by the Chief Investment Officer, Femi Ogunseinde, clarified the distinction between tokenisation and cryptocurrencies, explaining that tokenised assets are tied to tangible resources, making them more stable compared to the speculative nature of cryptocurrencies. “Tokenisation utilises several asset classes, including infrastructure, real estate, art, commodities, and even intangible assets like carbon credits. This is why we believe very strongly that it is a vital strategy,” Takang stated.
Managing a government asset portfolio worth over N18 trillion, MOFI is responsible for overseeing key public sector investments. Takang highlighted MOFI’s ongoing efforts to create a national asset registry to ensure the proper identification and structuring of federal assets for tokenisation. He explained that underutilised assets, such as moribund properties and natural resources, could be structured into Special Purpose Vehicles (SPVs) and tokenised for investment, allowing Nigerians and the diaspora to own fractional shares of these assets.
“For instance, Nigeria is producing about 400,000 barrels of oil a day, onshore. Imagine a situation where we can secure the results report of a particular asset with oil reserves, say one billion barrels in place, and create a special purpose vehicle that owns the digital rights to 200 million barrels. We can then sell the tokens to investors, use the proceeds to develop the assets, produce the oil, and pay dividends to the token holders. These are the creative solutions we are pursuing at MOFI today,” Takang explained. He added that such solutions could apply not only to oil and gas reserves but also to Nigeria’s abundant natural resources, including metals like lithium and gold, as well as agricultural commodities.
In addition to these benefits, tokenisation offers an opportunity to attract funds from non-traditional channels. “Tokenisation can help bridge the trust deficit by selecting the right federal government assets and offering Nigerians locally and abroad opportunities to own tangible parts of the nation’s wealth,” Takang remarked. He also underscored Nigeria’s readiness to learn from leading markets like Singapore and Switzerland, which are pioneering tokenization initiatives globally. However, he emphasised the importance of data security and the selection of reliable digital asset platforms, noting MOFI’s commitment to adhering to the Securities and Exchange Commission’s (SEC) regulatory framework.
Beyond the benefits of enhanced liquidity and transparency, tokenisation also has the potential to reduce traditional barriers to entry, such as high capital requirements. This aligns with MOFI’s goal of creating a more inclusive and accessible investment ecosystem in Nigeria. Moreover, tokenisation forms part of President Bola Tinubu’s broader economic reform agenda, which aims to achieve a $1 trillion economy.
Supporting MOFI’s stance, the Director-General of the Securities and Exchange Commission (SEC), Mr. Emomotimi Agama, represented by the Executive Commissioner, Operations, Mr. Bola Ajomale, said, “This move will broaden the range of assets available for investors and enhance capital formation in critical sectors.” He highlighted how integrating tokenisation into the capital market would create a much more dynamic trading environment while offering substantial benefits to institutional and retail investors alike.
Ajomale also reinforced the need for investor education and protection, particularly with the rise of digital finance and crypto assets. He outlined the SEC’s efforts to regulate Virtual Asset Service Providers (VASPs), emphasising that “These conditions are precedent to a healthy market and the development of investor confidence. A well-informed investor base is essential for the stability and growth of any capital market, enabling individuals to make sound, informed decisions and protect themselves from fraud.”
Ajomale concluded by stressing the importance of collective action among regulators, investors, and market participants to build a resilient and inclusive capital market. “Together, we can ensure that Nigeria’s capital market continues to thrive and contribute meaningfully to the nation’s economic progress.”