Capital Markets
From The Report: Nigeria 2017
View in Online Reader

Given the difficulties experienced by Nigeria’s economy in 2016, every sector grappled with challenges, and capital markets were no exception. From external pressures such as low oil prices and US interest rate shifts, to internal factors such as depreciation and slowing oil production, investors in Nigeria had to account for a range of risks. These factors had a clear impact on inflows. In 2016 foreign investment in emerging markets fell to its lowest level since the 2008 global financial crisis, with capital flight accelerating in early 2017. However, the slowing of the economy has had some positive consequences. Perhaps equally important, Nigeria’s capital markets are in the midst of a robust reform programme, which should significantly improve the market’s growth and sustainability over the long term.

This chapter contains interviews with Mounir Gwarzo, Director-General, Securities and Exchange Commission; and Kayode Akinkugbe, Managing Director, FBN Merchant Bank.

Articles from this Chapter

Overview

Foundations for growth: Structural adjustments are creating a platform for expansion
OBG
plus

Given the difficulties experienced by Nigeria’s economy in 2016, every sector grappled with challenges, and capital markets were no exception. From external pressures such as low oil prices and US interest rate shifts, to internal factors such as depreciation and slowing oil production, investors in Nigeria had to account for a range of risks. These factors had a clear impact on inflows. In 2016 foreign investment in emerging markets fell to its lowest level since the 2008 financial crisis,…

Analysis

Laws of attraction: Reforms aim to attract more retail traders
OBG
plus

As is the case in most of Africa’s capital markets, trading activity in Nigeria tends to be dominated by institutions. Retail traders and investors once played a more active role in the country’s capital markets, but the market drop following the 2008 margin lending crisis affected participation from that grouping. “In 2008 retail investors got burned in the market and it has taken them a long time, perhaps longer than expected, to return. They are highly unlikely to come back in a…

Interview

A fresh perspective: Mounir Gwarzo, Director-General, Securities and Exchange Commission (SEC), on developing Nigeria’s capital markets
OBG
plus

Interview:Mounir Gwarzo Which steps are being taken to increase the volume of foreign portfolio investment (FPI) in Nigeria? MOUNIR GWARZO: The goal of the Nigerian SEC is to develop the country’s capital markets by working with regional stakeholders, country-wide regulatory bodies and foreign partners. We are pursuing this in accordance with the country’s Capital Market Master Plan, which aims to make Nigeria’s capital markets the largest and most developed in Africa by 2025. We are…

Interview

Enticing investment: Kayode Akinkugbe, Managing Director, FBN Merchant Bank, on boosting the attractiveness of markets in Nigeria
OBG
plus

Interview: Kayode Akinkugbe How would future US Federal Reserve interest rate rises impact trading activity in Nigeria? KAYODE AKINKUGBE: Monetary tightening in the US increases the cost of borrowing in dollars. It can make the US domestic markets and assets more attractive to investors on a risk adjusted basis, compared to emerging markets, such as Nigeria. Although rates in Nigeria are significantly higher than in developed economies, some investors may be less willing to take the risk. However,…

Analysis

International investment: How market trends are affecting foreign investment inflows
OBG
plus

Nigeria was included in JPM organ’s Government Bond Index-Emerging Markets (GBI-EM) index series for local currency government bonds with effect from October 2012, with a 1.5% weighting, and was removed from it in September/October 2015. The inclusion followed the removal of the one-year lock-in period for foreign investors in government bonds by the Central Bank of Nigeria (CBN). This decision brought the sovereign market onto the radar of a wider range of international investors, in addition to the tracker funds. For several quarters the balance of payments (BoP) showed gross portfolio inflows of more than $5bn, mostly from fixed-income…

Analysis

External trade: More eurobond issuance on the way
OBG
plus

Nigeria’s inclusion in JPM organ’s emerging markets bond indices for eurobonds is not affected by its exclusion from the index series for Federal Government of Nigeria (FGN) bonds, and with good reason. Eurobonds are broadly traded on the sovereign’s external balance sheet, whereas the FGN exclusion was driven by the Central Bank of Nigeria’s foreign exchange measures and policies. The external story is easier to sell, because the indicators are more favourable. Current Picture The environment of still low international interest rates has been positive, but the four Nigerian sovereign eurobonds – maturities from July 2018 to…

Analysis

Equity perspectives: The second half of 2017 is seeing the market improve
OBG
plus

After three consecutive years of losses the All-Share Index (ASI) accomplished a marked recovery in the second half of 2017. As of August 2017 the ASI had gained 37.9% year to date (YTD), compared with a 2.9% YTD loss for the same period in 2016, and a 6.2% loss over the course of 2016. Despite the double-digit YTD gain, the market had still been in negative territory as recently as May 9, 2017 THE SURGE: The ASI has surged by around 47% since late April when recovery began. At the start…