INTERVIEW-Nigeria to expand stock exchange range to lure investors

Oscar Onyema2

Thu Feb 11, 2016/Reuters

Nigeria’s stock exchange, Africa’s second-largest, is looking to attract investors spooked by a weak currency and oil price by offering more products ahead of a possible listing.

“We would like to give exposure to asset classes that we are not necessarily trading,” chief executive Oscar Onyema, a former Wall Street executive who returned home like many Nigerians to tap opportunities in Africa’s biggest economy, told Reuters.

Onyema said the Nigerian Stock Exchange, one of the main entry points for foreign funds into Africa, plans to launch a clearing house to allow futures and options trading this year.

It will also change its ownership structure this year, a move that might bring in investors from abroad or lead to a share offer at some stage later, Onyema told Reuters on Wednesday in an interview at the bourse, which is located in a sprawling market district of the commercial hub of Lagos.

The exchange, which has been hit by an exodus of foreign investors due to an economic crisis sparked by a slump in oil revenues, saw the total market capitalisation of companies listed there halve to around $42 billion from $86.3 billion in 2007 when the market was booming.

Daily trading has dropped on average to less than $10 million, down from $100 million in 2007, brokers say.

It now plans to add options to its portfolio of products to boost this flagging liquidity and help investors manage risk.

To reach that goal, Africa’s second-largest bourse after Johannesburg was launching a clearing house which will be independent and will have banks, the central bank and other stock exchanges as members, the Harvard graduate said.

Onyema also said the bourse was on track to change its ownership structure this year from a mutual firm of 500 broker members to add shareholders, with the aim of improving governance and possibly open up new funding sources, including the possibility of a share offer.

“This is still early days,” Onyema said.

In October, the bourse said it had appointed South African bank FirstRand and local investment firm Chapel Hill Denham to advise it on the transformation.

Nigeria’s share index, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, has fallen 16 percent in the first five weeks of this year as foreign funds, unnerved by a weaker naira and the drop in crude prices, sold stocks.

This followed a 17.4 percent fall in 2015.

The recent sell-off prompted the exchange to put in place a circuit breaker last month to check volatility. It also plans to increase monitoring against market manipulation.

Onyema said the bourse was turning more to domestic investors, who control 75 percent stake in companies listed on the exchange and do not have currency risk to boost trading volumes.

 

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