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Why SEC banned investment technology platforms from offering foreign stocks to Nigerians

The SEC is reminding participants and investors that only approved securities can be sold to the Nigerian public.

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The Securities and Exchange Commission of Nigeria has issued a circular directing Investment Technology platforms such as Bamboo, Chaka and Trove to cease and desist from offering foreign stocks to Nigerians.

READ: SEC declares Bamboo, Risevest, others unregistered trading platforms

What does this mean?

SEC Nigeria is exercising its legal powers and reminding participants and investors alike that only approved securities can be sold to the Nigerian public.

In other words, foreign stocks such as Tesla Inc, Apple, Amazon, Google etc. which are currently not listed within Nigerian jurisdiction should NOT be offered to Nigeria-based residents and businesses.

Consequently, this new SEC directive now creates additional obstacles for young Nigerians who have been leveraging these new invest tech service providers to help diversify their portfolios.

Unfortunately, this SEC Nigeria directive is coming on the heels of the CBN directive prohibiting Banks from facilitating Nigerians trading Cryptocurrencies.

READ: How to Invest in International Stocks (1)

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What happens next?

The immediate next steps are yet to be officially announced.

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However, the SEC Nigeria has become more vocal of recent about the proliferation of alternative investments opportunities being offered to Nigerians. Additional concerns about capital flight from Naira to foreign destinations also contribute to the increasing protectionist stance from financial regulators in Nigeria.

For the service providers, this directive adversely impacts their business model and intense lobbying will be required to ensure the regulator’s concerns are adequately addressed.

Ultimately it is probable that this directive is a precursor to the SEC creating a more robust oversight framework. So watch this space.

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Ubah,Jeremiah ifeanyi is a PhD candidate of Economics in Covenant university. He has held positions as the financial manager in Opera and is also a research ambassador in M&S research Hub. Ifeanyi is currently the financial market analyst for Nairametrics. Follow Ifeanyi on Twitter @ubahjc

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Debt Securities

MTN invests N121 billion in fixed deposits, treasury bills, etc

MTN Nigeria invested a whopping N121.5 billion in bonds, treasury bills and foreign currency deposits in 2020.

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Nigeria’s largest telecommunications company, MTN Nigeria invested a whopping N121.5 billion in bonds, treasury bills and foreign currency deposits in 2020. This compares to just N9 billion in 2019 suggesting the GSM giant had challenges deploying the capital raised during the year.

MTN raised N143.96 billion in several syndicated facilities during the year which was to be utilized for its network expansion plans. However, the Covid-19 induced lockdowns affected capex activities forcing most companies to freeze spending on anything that is capital intensive. Effective Interest Rates for most of the loans obtained by MTN range between 3.5% and N5.8% per annum.

From the breakdown seen by Nairametrics, MTN invested N93 billion in naira denominated fixed deposits, equivalent of N19 billion in US dollar deposits and another N34.8 billion in treasury bills. The total amount invested earned MTN about N15.84 billion in income which it used to offset its finance cost of over N129 billion.

Why it matters

Interest rates for risk-free government securities fell drastically in 2020 as investment outlets dried up locally. This triggered a massive influx of money into the stock market helping it to close above 50%, one of the best performing in the world last year.

  • For companies like MTN with a significant cash hoard, treasury operations are a significant part of the activities of its finance department.
  • The investments in risk-free treasury bills despite the negative real return (when interest rate is adjusted for inflation) suggest corporates will rather fix their money in treasury bills than leave it idle in commercial banks.
  • It also suggests corporates like MTN are more favourably disposed to lending to the government despite Nigeria’s ballooning public debt and its attendant risk to its credit ratings.
  • Despite the investments, MTN still closed the year with about N275 billion cash in its balance sheet.

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Business News

NNPC, SEEPCO sign gas development agreement for domestic market

The execution of the deal is to help reduce gas flaring in the country and a show of NNPC’s commitment to facilitating the country’s transformation into a gas-powered economy.

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The Nigerian National Petroleum Corporation (NNPC) and an indigenous oil exploration and production firm, Sterling Exploration and Energy Production Company (SEEPCO), both partners in the Oil Mining Lease (OML) 143, have signed a Gas Development Agreement (GDA).

The execution of the deal is to help reduce gas flaring in the country and a show of NNPC’s commitment to facilitating the country’s transformation into a gas-powered economy.

According to a tweet post from NNPC on their official Twitter handle, the agreement between both parties was signed at NNPC’s head office, NNPC towers, on Thursday, April 22, 2021.

The statement says that this latest milestone provides the terms for the development of OML 143 Gas, providing gas for the domestic market which aligns perfectly with the Federal Government’s National Gas Expansion Programme (NGEP).

What this means

The execution of this project will not only help to support the Federal Government’s effort in reducing gas flaring by monetizing it but will also play its part in the government’s effort in the expansion of gas utilization in the country as a cleaner, cheaper and more reliable alternative form of energy.

This is coming at a time when the Federal Government is shifting focus to gas utilization as an alternative source of energy especially with the increase in the retail pump price of petrol. This is one of the various initiatives by the government as represented by the NNPC towards providing alternative sources of energy.

 

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