The Nigerian stock market plans to utilize technological advancement and the enrollment of investors’ details and holdings in electronic custody to cut its trading cycle from four days to two days.
The market currently operates a T+3 settlement cycle, implying that the value of trade and custodial of ownership would only be perfected in four days. T+3 means trading day and additional three days.
Nigeria currently has the best trading cycle in Africa, ahead of South Africa’s T+5 settlement cycle.
A further reduction in trading and settlement cycle will translate into quicker turnover and improved liquidity for investors in the Nigerian stock market.
Director General, Securities and Exchange Commission (SEC), Mounir Gwarzo, said ongoing initiatives such as cash direct settlement, electronic dividend and full dematerialisation being implemented by the capital market stakeholders would enable the transition from T+3 to T+1.
Besides, for the first time in the history of any capital market in Africa, investors in the Nigerian capital market are now to get dividend payment within 24 hours through the electronic dividend (e-dividend) payment system.
Speaking at a town hall sensitisation meeting on e-dividend at Muson Centre, Onikan, Lagos, on Thursday, February 11, Gwarzo said the proposed system will automatically allow dividends to be credited directly into shareholders’ accounts within 24 hours of payment by the company.
“We have achieved something that is very unique, even South Africa they have T+5, where when you do transactions you cannot get payment until five days. But with this system, we are going to achieve T+1 settlement system. You sell shares by today, payment are effected within 24 hours which is going to be the first by any capital market in Africa. No market in Africa has experienced that before and we are determined to ensure that it is achieved,” Gwarzo said.
He outlined that all these initiatives are aimed at encouraging retail investors to participate actively in the Nigerian stock market as part of a long-term 10-year master plan for the development of Nigerian capital market.
According to him, one of the strategies of deepening the market by the Commission is to target the retail domestic investors by implementing key confidence-building initiatives that would encourage the retail investors to invest in Nigerian market.
