2018 Capital Market Committee Meeting Update on Non-Interest Capital Market Products and Developments
The 2018 Capital Market Committee meeting focused on utilizing Non-Interest Capital Market products like Sukuk for infrastructural financing, regulatory challenges hindering market growth, and promoting financial inclusion. Recent developments include CBN's Exposure Draft on National Financial Inclusion Strategy and FGN Sukuk trading. Factors driving these developments are the leadership of SEC & CMC and stakeholder engagement. Challenges ahead involve tax guidelines, liquidity creation for non-interest banks, and awareness creation. Issues for CMC deliberation include tax neutrality guidelines and securitization of FGN Sukuk for Non-Interest Institutions.
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2018 CAPITAL MARKET COMMITTEE MEETING NON-INTEREST CAPITAL MARKET SUB- COMMITTEE Update
Objectives Identify ways of using Non-Interest capital market products e.g. (Sukuk) as a tool for financing infrastructural development 1 Identify the regulatory issues that may impede the development of the non-interest capital market including tax, liquidity and pension investment 2 Identify ways for using NICM as an instrument of financial inclusion and deepening the market 3
RECENT DEVELOPMENTS FROM LAST CMC MEETING CBN issued Exposure Draft on the National Financial Inclusion Strategy Refresh. Part of the deliverables is to create a level playing field for non- interest players and expand reach to un/underserved communities with preference for non-interest products CBN key CBN includes non-interest financial institutions under the 200bn Commercial Agriculture Credit Scheme FGN sukuk commenced trading on the NSE and FMDQ
FACTORS RESPONSIBLE FOR DEVELOPMENTS Leadership of SEC & CMC Continuous engagement of key stakeholders including DMO, CBN etc) Monitoring through the accountability framework of CMC
CHALLENGES / NEXT STEP Release of general tax guidelines clarifying tax neutrality of non-interest transactions by FIRS Work with supra national entities such as AFC, IFC,ADB to include sukuk options in their capital plans Issuance of sukuk-backed treasury bills by CBN to create liquidity instruments for non-interest banks Work with the SEC and other stakeholders to create awareness Issuance of local and foreign currency sukuk for infrastructural development by the Federal Government
ISSUES FOR CMC DELIBERATION Release of guidelines on tax neutrality for non- interest transactions by FIRS Securitization of FGN sukuk for Non-Interest Institutions and issuance of non-interest T-bills by CBN (similar to IILM sukuk arrangement)
