The impending election in Nigeria has been regarded as one of the most significant election in the country’s history due to its place in enacting a social and economic status quo. Numerous citizens and organizations have been critical about the need to curb election malpractices and ensure that the people’s choices prevail. Capital market experts have however lent their voices to also advocate for a free, fair and credible election, as it would especially help pave the way for the elected administration to salvage the lingering macro economic challenges that have ravaged the country’s economic growth, especially the foreign exchange crisis.
Stakeholders, during the Nigerian Exchange Limited (NGX) Virtual 2022 Market Recap and 2023 Outlook which took place on Thursday, stated that a fair and peaceful would be so significant in restoring the confidence of investors, as well as attracting new capital and forestalling funding by foreign companies. Due to the uncertainty that had recently ravaged the political space, there was a huge wane in equities of foreign investments in 2022. The forex illiquidity and other macroeconomic challenges were also important reasons. The foreign portfolio investors’ appetite for equities for instance, witnessed an equilibrium in the first 10 months of 2022, where participation closed at N349.59 billion, quite lower than the N1.73 trillion transaction that was recorded by domestic investors within the same timeframe.
Investment inflow to deteriorate if economic volatility is not addressed.
According to the October report of the Nigerian Exchange (NGX) regarding domestic and participation of foreign portfolio in equities in the first 10 months of 2022 indicated a 34.59 percent year to date increase as of October 30, 2022, with the patronage of domestic investors surpassing that of foreign investors. Simon Kitchen, the managing director of and head strategist of EFG Hermes Research noted that in spite of Nigeria’s huge opportunities, investment inflow would continually deteriorate if the economic managers of the country do not address the volatility and liquidity in the forex market.
Kitchen again stated that the present consultations by the MSCI Frontier Market Index which could potentially get Nigeria removed from the indexes was a bad outlook for the country’s equities market. He however emphasized the need for the incoming administration to curb the prevailing forex issues. He stressed that key issues like policy stability and stable foreign exchange policies would immensely spur activities, stimulate investments and cause an imminent boom in the market.
Regulators urged to consider incentives that would attract PFAs to invest.
He also encouraged regulators to consider incentives that would attract the Nigerian Pension Funds Administrators (PFAs) to further invest in equities and not the fixed market income. The Chief Executive Officer of NGX, Temi Popoola however indicated that the Exchange was readily available to work with the incoming administration to enhance sustainable economic growth. Popoola noted that numerous strategic measures had been mapped out to help position NGX as a viable support platform for the incoming administration. He stated that with Nigeria’s tax to Gross Domestic Product (GDP) being the lowest in the world with 6 percent, the NGX could help with sourcing for capital to boost the country’s revenue.
The NGX Executive Officer disclosed that the total trade turnovers of 2022 witnessed an improvement by 27 percent from N916 billion in 2021 to N1.16 trillion in 2022. He thus indicated that the recent approval of the NGX Technology Board listing rules would help the management intensify their efforts in attracting more technology companies which would in turn, deepen the company’s capital formation in the technology industry. He also pointed out that exchanges would work to enact more strategic partnerships with financial institutions.
Exchange to develop youth participation by creating digital asset products.
This strategy, Popoola said, would help immensely in developing the market. He added that Exchange was also close to a USSD launch, a collaboration with Telcos and banks to enhance the African capital market via payment integration with Afreximbank’s Pan African Payment Settlement System. Jude Chiemeka, Exchange’s Divisional Head in Capital Markets also indicated that the firm was focused developing youth participation by creating digital asset products which would be powered by blockchain technology.
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