Nigeria has been hit by the fall in oil prices, China’s economic slowdown, normalisation of interest rates by the US fed, new monetary policies by the Central Bank and, as a result of this, several businesses, including the Nigerian Stock Market, have been severely affected. Last week, the Nigerian Stock Market fell by 3.6 percent, its lowest point in three years. Stockbrokers and economic watchers are reacting to this fall as investors have dropped stocks due to the uncertainty in the country.
Prior to the current economic situation, the Nigerian Stock Exchange (NSE) put several policies and initiatives in place in order to satisfy the needs of investors in the country’s capital market, such as the Alternative Securities Market Board (ASEM) and Nigerian Depository Receipt (NDR).
Ventures Africa spoke with the CEO of the Nigerian Stock Exchange, Oscar Onyema, concerning the state of some of these initiatives, the current situation of the NSE and the measures put in place.
Ventures Africa (VA): What is the NSE doing to bring more issuers into the Alternative Securities Market Board (ASEM)?
Oscar Onyema (OO): We are working with several partners from our nominated advisers to government entities such as the Bank of Industry and other private sector entities to source for the credible SME’s that will be good candidates for the ASEM. The second thing is, when you find these candidates, you have to work with them to prepare them for listing. They have to meet the standards, the transparency disclosure, reporting, they have to convert from Nigerian gap to IFRS reporting standards. So it is a process and we will continue to make sure that we try to drive that process such that we can have good quality companies coming into that SME window and creating role models for other companies to want to emulate them.
(VA): What has the NSE done to update people on the introduction of the Nigerian Depository Receipt (NDR) to increase the depth of the market?
(OO): With regards to the NDR, we put it on hold, we have not launched it yet because of volatility in the market. As you know, the NDR is tracking the shares that are trading in foreign markets, you are creating receipts and you are tracking the price. So, you must have a way to couple those prices through arbitrage and if that is not done, your market will be totally off and that is why we have not launched it.
(VA): So what is the latest on the West Africa Capital Market Integration (WACMI)?
(OO): On WACMI, we have implemented stage one and there was a trade between Ghana and Nigeria. The trade emanated from Ghana and was done on the Nigerian stock exchange and was cleared. Stage two is where, instead of using domestic brokers, foreign brokers can go direct and we are working on this phase right now. Also, other broker dealers that haven’t tuned up their processes to accomplish phase one are still are working on it. So it’s an on-going effort and you probably haven’t heard much from us because the chairmanship is now in Ivory Coast so most of the information now comes from the Ivory Coast.
(VA): Has the x-gen trading platform been effective since its implementation?
(OO): It has been effective. It has allowed our market to open up and create open access, given brokers an opportunity to plugin using Financial Information eXchange (FIX) and is now giving us the opportunity to reach out to millions of potential investors through electronic trading. As you know, a lot of Nigerians have mobile phones so they can access us through those and other management systems belonging to the brokers.
(VA): Do you see NSE going through the same crisis like in 2008 when the stock market fell?
(OO): We do not want to be in the business of forecasting where the index should end the year. Our job, really, is to provide a credible platform for using capital and for investors to put money into safe companies, safe securities and receive returns. So we want to focus on doing that and allow the index reflect what is actual going on in the economy.
(VA): What are the measures you are putting in place to make sure the index does not fall?
(OO): No exchange can put measures in place to make sure the index does not fall. The index will fall and rise depending on what is going on in the economy and the companies that are listed on that index.