The State of Nigeria’s Registrar Industry
The registrar industry in Nigeria plays a unique role within the financial services sector. Unlike other sectors that create transactions, registrars merely participate in those created by others. This dependency on the broader capital market means that growth is limited to what the market offers. For instance, the issuing houses are responsible for advising on M&A, acquisitions, or corporate actions, which then result in business for registrars.
In recent years, the number of equity listings has been low, with only one new listing last year. Similarly, bond activity has been muted due to high interest rates. Competition among registrars is also limited, as 85-90% of the industry’s activity is controlled by the top four firms. This lack of competition has led to a price war rather than a focus on service quality, as the service itself tends to be commoditized.
Impact of Recapitalisation Drive
The recapitalisation drive in the financial services industry has had a mixed impact on the registrar sub-sector. While there have been increased commercial paper issuances, these are typically directed at qualified institutional investors rather than the public. As a result, the impact on new business for registrars has been limited.
For example, two potential listings were discussed last year, but companies opted for commercial paper instead. This shift reduces the number of investors and limits the volume of work for registrars, who rely on scale to generate revenue.
Key Transformations Over the Last Five Years
Over the past five years, the registrar industry has seen significant transformations, particularly in digitisation and shareholder engagement. Before the pandemic, all Annual General Meetings (AGMs) were physical. However, the necessity of virtual meetings during the pandemic led to the adoption of digital platforms for AGMs and other post-trade activities.
Today, many registrars, including Coronation Registrars, offer fully virtual or hybrid AGMs. Investors can now attend from anywhere in the world, participating in real-time. In primary offerings, technology has also been integrated, as seen in the fully digital MTN public offer. This shift has improved efficiency and reduced reconciliation issues.
Unclaimed Dividends: A Persistent Challenge
Unclaimed dividends remain a challenge, though progress has been made. Companies like Airtel and MTN have very low levels of unclaimed dividends, while older companies such as First Bank face higher percentages due to legacy issues. The lack of a process for declaring accounts dormant complicates matters, as some shareholders have not updated their information over the years.
Efforts are ongoing to reduce the backlog, but addressing this issue requires broader reforms, such as attracting younger investors and simplifying the onboarding process.
Youth Involvement in the Capital Market
Low youth involvement in the capital market is a concern. Younger people often prefer fast, convenient processes, such as buying cryptocurrencies through mobile apps. In contrast, the capital market’s onboarding process is more complex and lacks a unified identity management system. The SEC is working on a solution, which could improve the user experience and attract younger investors.
Education is also crucial, as many still view the capital market as gambling. Addressing these challenges will require both technological and educational interventions.
Leadership and Reforms
As president of the Institute of Capital Market Registrars, efforts were made to elevate the institute’s status and improve training standards. Collaborations with the SEC led to requirements for capital market operators to belong to trade groups. While the goal of being chartered by the National Assembly was not achieved, significant progress was made.
At Coronation Registrars, the firm manages about 40% of listed companies on the Nigerian Exchange. The company has been involved in landmark transactions and focuses on delivering convenient and seamless services to shareholders and the broader economy.
Staying Competitive in a Technology-Driven Market
To stay competitive, Coronation Registrars has introduced several initiatives, including the Electronic Dividend Mandate Management System (EDMMS) and a unified KYC platform. These efforts aim to enhance the user experience and build trust in the capital market.
By ensuring transparency and efficiency, the firm continues to contribute to the growth and stability of the Nigerian capital market.
Economic Reforms and Their Impact
Ongoing economic reforms are beginning to influence issuer activity and investor engagement. The Naira has shown stability, inflation is contained, and the NGX has delivered strong returns. Power sector reforms and government bond issuances are also contributing to a more predictable environment.
However, further reforms in oil and gas, as well as the privatisation of NNPC Limited, are needed to unlock additional market potential.
Untapped Potential in the Capital Market
One area with significant untapped potential is infrastructure development. The capital market can provide patient capital for long-term projects, such as road construction and rail systems. By leveraging these opportunities, the market can play a crucial role in driving economic growth.
Federal Government’s Role in the Market
The Federal Government’s entry into the market to raise funds could bring both opportunities and challenges. While there is sufficient capital available globally, the key lies in creating a stable and predictable environment that attracts investment. If confidence and predictability are established, the market will see increased participation.
