UK investors admit Nigeria capital market offers huge opportunities

By Iheanyi Nwachukwu

Nigeria as the largest economy in Africa has the potential for a larger capital market that offers better returns for any prospective investor now and in future, according to government and private sector representatives at the 5th edition of the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE) Dual Listing Conference held Friday in Lagos.

“Nigeria still offers huge opportunities for investors. Africa and indeed Nigeria are very high focus regions for London Stock Exchange Group (LSEG),” Gokul Mani, head of primary markets, Middle East, Africa and India at LSEG said at the conference.

The high profile event held Friday June 1, 2018 aimed at increasing business relationship between Nigeria and United Kingdom (UK), brought together companies keen to explore a London/Lagos dual listing, corporate finance experts, lawyers, capital market operators, regulators, government officials, and thought leaders who discussed investment opportunities in Nigeria.

Capital markets are critical to sustainability of growth and development in an economy, and one of the things that Nigeria needs to sustain its growth, is a solid and vibrant capital market ecosystem that will attract investment and unlock the potential that exists in the economy.

The Nigerian Stock Exchange continues to increase its product offerings to the investing public with the listing of securities such as the $300m Diaspora Bonds and $3bn Eurobonds in 2017, the N100billion Federal Government Ijarah Sukuk and the Sovereign Green Bond.
These add to the nation’s funding options to catalyse the rebound of Nigerian economy and offer investment alternatives to the vast majority of Nigerians. Nigeria’s inaugural issue in the Green Finance market earned a credential as the first ever Sovereign issuance in Africa.

The Nigerian Stock Exchange and London Stock Exchange Group signed a capital markets agreement in 2014 and renewed it in 2017, to support African companies seeking dual listings in London and Lagos. The agreement followed the implementation earlier in 2014 of a unique new cross-border settlement process between the UK and Nigeria.

In 2014, Seplat Petroleum Development Company Plc became first Nigerian company to simultaneously dual list equity shares in London and Nigeria Stock Exchanges. The company’s Initial Public Offering (IPO) raised $500 million.

The recent dual listing of the first-ever FGN Sovereign FX denominated $1 billion Eurobond on The Nigerian Stock Exchange and London Stock Exchange gives credence to the successful partnership between the two exchanges. There are other corporate Eurobonds in pipeline.

Also speaking at the conference themed “Attracting Global Capital to Drive Nigeria’s Economic Reforms and Sustainable Growth Development,” Laure Beaufils, British Deputy High Commissioner, British High Commission, Lagos said the UK government through the London Stock Exchange (LSE) Group has been working to attract UK investors to Nigeria.

“The UK is fully committed to further support investment, finance, and inclusive growth in Nigeria. One out of every five companies listed on FTSE 100 Index has business presence in Nigeria,” she said.
The UK Government currently supports Nigerian economic development agenda through international aid provided by DFID and other foreign policy instruments through the Foreign and Commonwealth Office, UKTI and other such agencies.

As Federal Government grapples with the task of articulating a clear economic blue print for the short-to-medium term within which credible fiscal and monetary policies can emerge, the reality of the need to leverage and embrace the globalisation of economies and financial markets becomes clearer.
Babatunde Fashola, minister for power, works and housing, said at the conference that the Federal Government recognises current capital deficiency, but said the deficiency “was as a result of decades of poor economic management.” He expects to see more involvement in enduring investments in infrastructure the country needs –such as rails, roads, airports.

The Nigerian stock market recorded an uptick in 2017 as equity market capitalisation grew by 42.12percent closing the year at N13.62trillion compared to N9.54trillion in 2016. As at Thursday May 31, the NSE ASI witnessed a reversal of all the gains made in 2018 and pushed returns to negative path of 0.36percent.

“Doyin Salami, senior fellow, Lagos Business School (LBS) said “Both the international and local capital will slow down as a result of uncertainty around elections. It is a global thing not Nigeria specific. Economy is in recovery mood, yes, if you look at first-quarter number, GDP is rising but there are lots of concerns. Nigeria is capital deficient. The question is what will be the role of private capital and corporate governance in Nigeria’s development.”

“The enthusiasm for Nigeria’s economic growth is not taken for granted. Capital market is among many sources of growth in an economy. Resource allocation from capital market is the easiest way to grow an economy. We should support the increasing partnership between NSE and LSE. This is the way global economies should take,” said Chiedu Osakwe, Chief Negotiator, Nigerian Office for Trade Negotiations.

“Creating and sustaining the growth trajectory of our exchanges, capital markets, financial markets, economies and the continent as a whole, requires a strong commitment from each and every one of us,” said Oscar Onyema, CEO, Nigerian Stock Exchange.
“Our collaboration with the London Stock Exchange is deliberate and strategic. It is geared at encouraging seamless cross-border access between our Capital Markets to ultimately drive deeper capital markets that enable capital formation for Businesses and Governments; create larger liquidity pools and greater competitiveness for our investors; and enhance capacity and promote diversity of investment products to meet the needs of a wide range of investors and issuers,” Onyema added.