Oliver Wyman to help de-risk capital market custodian in Nigeria
Nigeria’s Central Securities Clearing System (CSCS) – custodian of all transactions in the country’s capital markets – is looking to diversify its business model and protect against commodity price risk. Oliver Wyman has been hired to support the process.
CSCS uses electronic ledgers to keep a certified record of all securities exchanged on Nigeria’s capital markets – including the Nigerian Stock Exchange (NSE) – as a hedge against fraud, forgery, complexity and black market trades. As it stands, the company holds over 10 trillion naira ($25 billion) in NSE equities and more than 240 billion naira ($0.5 billion) in corporate bonds.
A reflection of Nigeria’s financial ecosystem, CSCS is heavily reliant on oil trade – putting its income at risk when global oil prices fluctuate. And much like the rest of Nigeria’s economy, CSCS is now trying to diversify beyond the oil market to prevent this risk, and take the country further towards global competitiveness.
“If you are a monolithic company, where you rely on fees on your depository, whenever there’s a shock in the market it affects your bottomline,” said CSCS chief executive Haruna Jalo-Waziri, who spoke to Bloomberg.
“If you diversify – earning other income not dependent on the market – then you de-risk your single income source and so that helps sustainability,” he added.
Global management consultancy Oliver Wyman will support this de-risking process. “They are working with the board and management to define our strategy,” said Jalo-Waziri.
Other partnerships are also planned as part of the diversification drive: CSCS is in touch with the NSE to cut transaction settlement time, and is working with authorities to reduce the documentation required to trade in securities – particularly for foreign investors.
The company also plans to partner with a financial technology (FinTech) business if required, to leverage tech as a tool for more efficiency and a bigger portfolio. And new business ideas are already in the works: “One business can be us becoming a depository for educational institutions from primary, secondary to university,” said Jalo-Waziri.
“We continue to work with the NSE and other stakeholders to simplify the market, starting from onboarding through to the structure of the trade,” he concluded.
