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Dematerialisation at capital market hits 100% electronic share certification

Ten years after the plan was initiated, relief is on ground as the Nigerian capital market has finally achieved full dematerialisation of share certificates.

Analysts in capital markets say dematerialisation is the conversion of physical share certificates of investors in the capital market to electronic forms to aid seamless trading.

In order to address the various problems associated with share certificates such as delay in issuance, verification, loss, theft, and forgeries, among others, SEC, in partnership with other stakeholders, opted for the full dematerialisation of the certificates.

Major benefits that full dematerialisation would bring to the market were immediate availability of the shares for trading as soon as mandate was given to brokers; enhancement of price discovery and deepening of the market; and possibility for securities lending and borrowing by shareholders for more income.

The General Manager, Operations, Central Securities Clearing System Plc, Joe Mekiliuwa, said “We are now 100 per cent dematerialised, and this was achievable following the initiative by the Securities and Exchange Commission, as well as efforts of the of market community”.

The dematerialisation journey it would be recalled, targeted at boosting liquidity in the capital market.

He said currently, about 8.5 million accounts had been dematerialised in addition to the 7.5 million that had been done much earlier, adding that all share certificates existing in the country’s capital market system had been converted to electronic forms.

According to him, “Even accounts that are yet to be activated by investors are covered in this arrangement. This means that investors without accounts in stock broking firms now have the share certificates with them dematerialised, though they are holding physical certificates”.

“The physical share certificates are now useless, because the electronic records of the certificates with the registrars have been turned into the CSCS account.

“Investors without accounts at all should go to brokers and fill a form for full dematerialisation. Such records will be sent to the registrars, who will then inform us to move the shares to the accounts created.”

Due to the fact that the share certificates now had electronic presence, they were now in the system and trading on them could be done swiftly.

Before now, SEC had given capital market stakeholders a mandate to achieve 100 per cent dematerialisation, and the stakeholders led by the CSCS had earlier moved to achieve 100 per cent dematerialisation of the share certificates by the end of the third quarter of this year.

In the last seven months

At the beginning of the third quarter, over 98.4 per cent of the shares certificates of quoted companies on the Nigerian Stock Exchange had been dematerialised and in the CSCS depository.