Nigeria sets N50m capital base for commodities’ collateral firms

 

Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), has set a minimum capital base of N50 million for any company seeking to operate as a collateral management company, under the Nigerian commodities trading ecosystem.

SEC yesterday released additional regulatory frameworks for the Nigerian commodities trading ecosystem, outlining specific rules and regulations guiding collateral management and warehousing, two important functions in the efficient trading of commodities.

According to the new framework, a collateral management firm is expected to provide fidelity bond of up to 20 per cent of its minimum paid up capital of N50 million as well as sworn undertaking to keep proper records and render returns. It must also provide evidence of the minimum paid-up capital of N50 million.

The rules stated that for a collateral management company to be registered by the Commission, it must submit an application to SEC accompanied by the relevant documents. It must also apply for registration of a minimum of two sponsored individuals one of whom shall be the chief executive officer.

Some of the required documents included two sets of completed appropriate SEC Forms to be filed by the sponsored individuals; a copy of the Certificate of Incorporation certified by the Corporate Affairs Commission where a copy not certified is filed, the applicant shall present the original for sighting by an authorised officer of the Commission; a copy of the Memorandum and Articles of Association certified by the Corporate Affairs Commission, which shall among others, include power to act as a collateral manager, a copy of the appropriate CAC Form containing particulars of the directors certified by the Corporate Affairs Commission; as well as a Copy of latest audited accounts or audited statement of affairs for companies in operation for less than one year.

According to the new rules, the two principal officers of the collateral management company who shall be registered as sponsored officers must have a minimum of a university degree or its equivalent with not less than 10 years relevant post-qualification experience; a list of key officers and technical experts engaged and details of their qualifications, which should capture evidence of financial, technical capabilities to carry out the functions of a collateral manager, a list of relevant technology systems in place as required by collateral management services; information relating to the relevant commodities management facilities including: assaying facilities, warehousing, aggregation, computerization and telephone systems and a well finalized business plan.

“Two copies of existing or proposed by-laws or rules, Code of Conduct, Warehousing Guidelines etc.,  instruction and inspection manuals of warehouse activities; detailed information about the promoters and principal officers of the Collateral Management Company; two copies of Warehouse Accreditation requirements of the Collateral Management Company; detailed information about the Technology system to be adopted; and an Undertaking by the CMC to always forward copies of amendments of its Guidelines for approval by the Commission,” the new framework stated.

On management of collateral firms, SEC rules stipulate that board of directors and the chief executive should be appointed with prior approval of the Commission;  key officers are to meet the fit and proper criteria as provided in the regulations; while the a collateral firm is expected to maintain the eligibility criteria provided by the Commission and notify the Commission immediately if it ceases to fulfill any of the conditions provided in the rules.

A collateral firm is also expected to  maintain high standard of integrity and fairness in discharging its functions and its dealing with other persons with whom it has agreed in writing to render services as collateral manager while it is also required to fulfill its obligations in a fair, efficient, transparent and ethical manner;  and act with due skill, care and diligence in performing all its functions and discharging all its obligations and responsibilities.

Upon registration, the collateral firms expected to display such license, in a conspicuous place, in the principal place of its business; establish the procedure for pledging, in favor of a financial institution, the depositor’s commodities held with the warehouse against which electronic warehouse Receipt has been issued and certify by a warehouse.

Also, the Commission stipulates that every warehouse that stores commodities to be traded on a registered Exchange shall apply to be registered by the Commission, while the Commission shall maintain a register of all registered warehouses which shall be published on its website.

A warehouse applying for registration shall submit proof of ownership or registered-lease deed or rent agreement, along with disclaimer from the owner of the warehouse and property providing waiver of ownership regarding commodities stored in such warehouse, in case of leased or rented warehouse;  present evidence of construction in compliance with the National Building Code, present evidence of compliance with relevant Federal and state regulation relating to the operation of warehouses, and have  facilities appropriate for storage of commodities.

Other requirements are that the warehouse should have appropriate security arrangements in place, have adequate trained staff with expertise and knowledge of scientific storage of commodities, have requisite equipment for weighing and quality measures of commodities, as well as have comprehensive insurance cover for the building, equipment, stock and other items as may be necessary.

The rules also stated that the warehouse should be located in a place with access to infrastructure to support its operations and have sufficient space for parking and movement of large vehicles, have an efficient system for loading and unloading of commodity including proper mechanism for segregation of different kinds/quality of commodity.

According to the rules, they are to submit a Standard Operating Procedure (SOP) which shall cover the following among others: Procedures for acceptance of commodities to be deposited and delivery of commodities; procedures for weighing, sampling of goods to be deposited in compliance with industry standards, procedure for verification of commodities and communication to depositors, and procedure for maintaining the quality of the goods stored in line with relevant specifications.

“Others are procedure for Know your depositor, security policy for ensuring the safety of the goods, procedure for the use of modern techniques for storage of goods, procedure for determining and addressing losses due to theft, fire, burglary, fraud, negligence and force majeure events, procedure for internal verification of stock, procedure for maintenance of warehouse and preservations of Stock, Organizational structure and Job description for every staff,” the new framework stated.

He recalled that last year the Minister of Communications and Digital Economy, Dr. Ibrahim Pantami announced that Nigeria’s broadband penetration increased by 10 per cent over the previous year, from 33.3per cent to 43.3per cent. With this positive development, we are hopeful that this year’s penetration rate would surpass that of 2020 as the event planned to encourage every segment of the sector to double their efforts in terms of encouraging further penetration.

He commended the efforts of Dr Pantami at resolving key challenges facing the industry and also advocating for the speedy implementation of the national broadband plan. The fruits of his efforts can be seen in terms of broadband penetration and various policies that have been initiated, ratified, and issued to further encourage the growth of the industry.

He also lauded Prof. Danbatta for the work he has done over the years in promoting broadband penetration in the country especially with the facilitation of the smooth operation of the Infraco class of license with the core objective of ensuring broadband infrastructure gets to every major cities within the country.

He said the development of a solid digital economy rests on the foundation of a well distributed broadband infrastructure and involves the convergence of all technology types and classes of service, adding that NCC has brought together key industry leaders cutting across the nine sub-group of ATCON’s membership to discuss and strategize with the leadership of the public sector on the best ways to achieve an accelerated implementation of the Nigerian National Broadband Plan.