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By Chinwendu Obienyi
The NGX-Invest platform is a recent innovation by the Nigerian Exchange Group (NGX) designed to simplify and digitise the process of investing in the primary market. It allows investors to use their mobile devices to participate in the purchase of primary shares offered by issuers on the exchange, enhancing accessibility and convenience.
This development is particularly timely as Nigerian banks are seeking to raise additional capital to meet new regulatory requirements set by the Central Bank of Nigeria (CBN). The Group Chief Executive Officer, Nigerian Exchange Group, Temi Popoola, in an interview monitored by Daily Sun, said the innovation will foster a more inclusive financial ecosystem, support broader financial inclusion and economic growth.
Popoola also added that the NGX-Invest integrates with various payment gateways while simplifying the process of transferring funds for investments.
Excerpts
NGX-Invest
This platform builds on what I think has a very strong historical technology consumption by the exchange. The exchange over time has been a market leader when it comes to innovation, from market infrastructure and architecture that we have today. If you look at COVID-19 pandemic, this was even before I joined the exchange, we traded periods, almost 3 years without any downtime in trading, this speaks to investments that have been made in technology. So what we have done is to build both on that and to build on what I think are a few other pillars like our intermediaries who had invested a long time in technology. In 2021 for example, we did have in this market, a digital primary market transaction that was end-to-end digital. This was done on the back of some hard work of some of our intermediaries at a time – primary offer, that application was called. So, working and planning on things like that and working with the market regulator, the Securities and Exchange Commission (SEC) and within the rules guiding the market, we have come up to say that this digital journey that we have spoken a lot for quite some time and question ourselves as to how we can make share transactions easy via the use of phones to invest in the primary market. Today, there are public offers in some banks, if you want to invest in that easily, then why should it not be possible within two minutes especially when you look at the innovation within the broader financial market. Hence, that is really the heart of what we have been able to put together.
User onboarding and verification
This technology onboards you via a verification and we have the CBN and NIBSS to thank for a service like this as we can verify who you say you are via bank verification number (BVN). For a platform like that, you would expect that in our market, you will need access to a brokerage account and this is where the CSCS becomes very critical as we have a connection where we can pull up your brokerage information or create something for a new investor. Then of course, you have to pay to integrate this into payment gateways, there are banks that have their own payment gateways and channels and so whilst raising capital, this might be a good add-on for them to see their payment gateway and what it means for people to transfer to pay for their offers.
Can it be used elsewhere in the world apart from Nigeria?
So, the simple answer is that technological, you can but as you expect that our industry is governed by strong strict rules and one of the things we decided to do was to work within the ambit of the rules and laws that we have today. As you are aware, innovation tends to leapfrog regulation, we are both a regulation group of companies and market development oriented firm and so we are bound by just how regulation would allow that to happen. We have decided to keep things as simple as possible for now and work within the ambit of the rules of the industry.
Competition with other online brokerage apps
Technology is not something that you can close the door to and so we expect competition and we will welcome that as it will make the capital and financial market better. There is a huge demographic of Nigerians that we are not seeing in the capital market today, this is what I would call the absence of the young underbelly of Nigeria. We are not seeing them to the size and scale that we would like and whilst there are many constraints to that, including the macroeconomic environment, power supply challenges, one of them is a barrier to capital flow. This idea that you actually make payment and get invested in the market is what people would refer to as laborious. The young people in Nigeria are used to just a few clicks to get whatever they want to get on a mobile phone. Secondly, on broader sense especially with regards to financial inclusion, we think that when people have this desire to invest and make more money, it brings them to closer to the banking community and finally, one of the things that we found was how we can connect the capital market to the exchange to banks and financial centers because that is truly where the capital sits. Hence, one of the good things that we have done is that many of the issuers (banks) have been kind enough to spend time to consume this technology and to connect those APIs into some of their own distribution pathways.
How does it work with other online brokerage platforms who are already in the market?
Like I said earlier, we do have intermediaries who also consume technology and frankly we have them to thank for bringing up these thoughts in our minds. One of the things that we have been careful to do was to make this platform accessible to all. Think of this as a piece of software that has connections available to anybody who can consume this technology, connecting them to their consumers. The other things that we have done is that you also leave room for those intermediaries who are used to our traditional models of investing. We also see that brokers can upload bulk orders on this innovation and so we have made this open as possible especially because this is a new territory. We do not know it all but we want to make sure that we do the little bit that we can, digitize the capital market and make sure that we push the frontiers further.
Wealth creation and Market participation
This is one piece of what is a very complex conversation. Fortunately or unfortunately, financial markets are complex. You are aware that retail participation in the capital market is somewhat low and so one of it is that we are trying to address this with this innovation. Another big one is that people are not educated enough as to what is available in financial markets and that is a huge burden. Another thing is what other products and asset classes do we have for investors so that people who do not want to buy shares can buy something else.
Future expansion and integration of bonds sales
We at the NGX are tech-inclined and as long as it is an asset class that is consumable by our retail investors, we must find a way to distribute that electronically. But, few of the structural challenges are disposable income as before you invest, you want to make sure basic needs have been met. We do know the current situation of things in the country and so there are several parts to this but what we have to do is see which highest part of leverage for all of this, attack and then execute successfully and patiently as we can.
Banks embracing innovation
One of the things we try to do at the group level is to say as we lock up the entire ecosystem and see how we can address challenges so that each of our subs are able function at an optimal level. The secondary markets have always been open and our flagship exchange subsidiary does a good job and then on our primary side which speaks to the banks raising capital, this is not a solution for banks but a solution for primary market issuances by any issuer on a platform like this. The banks just happen to be issuers right now. One of the ways to deepen this primary market space is that if you can pull in as many people as possible into the market through technology like this, ultimately, they will trade downstream which then gives you a much more efficient market, crystallizes a bit more listings and primary market activity.
Dividends
Historically, for people who are familiar with our market when it was paper offering, you will have to do more work to follow up e-dividend accounts but once it is digital, you will have the chance to put any account of any bank where you would want your dividend to go into, we confirm that in real time with NIBSS, make sure that it is really you that owns the account and that goes to the registrar and then your dividends also get paid. This also has wider positive implications as with your BVN and the dividend account that you have, there might be other shares that you have that are tied to your BVN and so there is a wider conversation that perhaps the dividends could be aggregated there.
