Lagos - Nigeria launched a digital platform on Thursday for over the counter trading of bonds, money market instruments and foreign exchange in a move the central bank said would deepen capital markets and aid infrastructure financing.
The Financial Markets Dealers Quotations (FMDQ) aims to replace the current telephone dealing system, as well as helping the central bank better regulate Nigeria's growing debt and money markets and provide data services.
No one will be required to use it, but proponents expect a quick uptake. Although T-bills, interbank lending and even forex will be tradable on it, its main function will be to boost the longer term bond market, the central bank says.
Data from the Debt Management Office (DMO) shows Nigeria had about 7.37 trillion naira in bonds traded as of June this year, including federal bonds and treasury bills, state government and corporate bonds.
That is dwarfed by equities, which have a market capitalisation on the stock exchange of 12 trillion naira.
"It's one of the boxes I wanted to tick before I complete my term," Central Bank Governor Lamido Sanusi, who steps down next year, told reporters after the launch in Lagos.
"It provides an enabling environment for improved price discovery for the deepening of financial markets, and we all know the country needs long term funding for infrastructure."
The economy is growing at around 7 percent a year, but it faces huge infrastructure bottlenecks such as a lack of power that need funding to fix.
Sanusi said one of the reasons the banking system still posed such a big risk to the economy is that the latter was so dependent on banks alone for financing.
"With the development of the capital market, bringing in insurance companies, external parties, it diversifies the sources of funding," he said.
Nigerian capital markets are undergoing a revamp. The Nigeria Stock Exchange adopted the Nasdaq X-Stream trading platform at the end of last month, which improved the speed of transactions, dealers said.
Other reforms include relaxing restrictions on price swings to 10 percent a day, from 5 percent previously, opening into U.S. trading hours and allowing short selling.
Nigeria by June 30 this year has 6.85 trillion naira in federal bonds and bills outstanding, its 36 states had 319.8 billion naira between them and corporate bond holdings amounted to 200.44 billion naira, DMO data shows. "We will not be able to get to where we want to be, to address ... $350 billion of funding requirements for infrastructure over the next 10 years if we don't have a market that is sophisticated, innovative, efficient," chief securities regulator Arunma Oteh said in a speech.
"That is what FMDQ represents."