5th Building African Financial Markets (BAFM) Capacity Building Seminar, Mr. Oscar N. Onyema, OON, President, African Securities Exchanges Association (ASEA) 28, April 2016, At 9.15AM

Distinguished guests, ladies, and gentlemen. Good morning and a very warm welcome.

The Nigerian Stock Exchange (NSE) in collaboration with the African Securities Exchanges Association (ASEA), is pleased to host you to the 5th Building African Financial Markets (BAFM) capacity building seminar themed Addressing Liquidity Concerns in African Capital Markets. I will like to extend a special welcome to our international guests, the ASEA Exco and Mr Aigboje Aig-Imoukhuede, President, National Council of the NSE.

This is the first time the BAFM is being hosted outside of South Africa, and it is with great pleasure that I stand before you today opening the two day training seminar dedicated to fostering collaboration and knowledge enhancement among stakeholders in the African financial market. The BAFM seminar is a capacity building initiative championed by ASEA in collaboration with its members, and it is designed to promote growth in African financial markets. I salute the individual efforts of Geoffrey Rothchild and Zeona Jacobs from JSE, who have hosted the BAFM for the last four years. I also want to thank our esteemed sponsors Zenith Capital, Bloomberg, Thomson Reuters, Stanbic IBTC Stockbrokers, FBN Quest, Digital Encode, Coronation Securities and Rack Centre.

African capital markets are instrumental in financing the continent’s infrastructure and capital requirements, but many African stock markets as you know are characterized by a lack of liquidity. This is why the topics to be discussed over the next two days by experts from Europe, Middle East and Africa are designed to build capacity around liquidity enhancement by driving new learnings in the securities trading business, including information security which is increasingly a high risk area in our markets. In addition to being relevant to exchanges, the topics are also particularly apt for the African broker dealer community, clearing, settlement and depository (CSD), Regulators, Central Banks and other financial institutions who will benefit from improved liquidity in African capital markets, and also by the users of derivative products that are beginning to gain attention in our markets. Indeed we have people from about 17 countries registered.

The decline in commodity prices, geopolitical tensions, lower Chinese growth, and the relative weakening of local currencies in Africa resulted in slower growth across a number of economies in 2015. This was mirrored by the performance of benchmark indices of many African exchanges, with almost all closing the year on a negative note. Despite the challenging operating environment in 2015, many countries in sub-Saharan Africa are expected to see a gradual pickup in growth in 2016.

According to research by Thomson Reuters, African initial public offers (IPOs) are set to raise over $3.1 billion in 2016 doubling the amount raised in 2015, and the highest value raised in any year since 2010. Technology, Consumer Essentials and Industrial sectors are set to be the busiest among the 15 IPOs in the African pipeline. Now, what does this mean for us? It means that we must position African capital markets as a viable funding source for the anticipated growth, and liquidity is the key success factor to this goal.

Sub-regional integration efforts such as WACMI in West Africa, CoSSE in Southern Africa, and EAC in East Africa are important initiatives that have the potential to unlock demand among issuers and boost liquidity. The African Exchanges Linkage Project (AELP) which is a jointly owned mandate between ASEA and the Africa Development Bank (AfDB), is also aimed at addressing the lack of liquidity in African capital markets. Thus, these initiatives are encouraged to fast-track the integration of their regional markets.

Like integration, technology has become a facilitator of liquidity. Historically, the technology focus for exchanges was on execution, however today, the focus has shifted to information services, pre trade, and post trade dimensions. Accordingly, information services, pre-trade and post-trade are where the next waves of innovation for exchanges are expected to emerge. Emerging technology such as block chain and fintech are gaining traction. Business models such as Uber and Airbnb who have no taxis or rooms but yet create liquidity in them, demonstrate that technology does not create liquidity on its own but instead it brings together market participants, and that leads to liquidity. In the capital markets, technology can be powerful, as it can bring very diverse market participants together as you will see in some of the sessions scheduled later in this programme.

Building the African financial market is our collective responsibility, hence we must seek out knowledge that empower each of us to remove impediments such as outdated systems and trading practices that impede the ability of African exchanges to handle sizeable capital inflows. Evolution in local regulation is starting to increasingly provide the opportunity for pension funds to diversify their expanding portfolios beyond equity investments in traditional sectors, such as banking and oil & gas availing additional pools of funds to be traded in our markets.

These and many more are some of the untapped opportunities waiting to be explored, and it is imperative that we are prepared to take advantage of these opportunities. Luck they say is what happens when preparation meets opportunity. Therefore, let us create and take ownership of our own luck, by engaging and participating in this rich seminar, and then proceed to leverage the knowledge in innovating, and enhancing efficiencies in our different capital markets.

I am confident that the learnings from our interactions during this seminar will elevate our business strategies to ride out the headwinds that our markets have experienced in recent times.  In the end, I hope that we are better positioned to unlock the growth potential of our economies, and are empowered to advance the development of our capital markets.