The renewed focus of private sector driven growth by the new administration portends a brighter future for Nigeria’s capital market. Over the past eight years, the market has suffered neglect from the government even as macroeconomic conditions in the country worsened. The capital market is usually touted as the barometer to measure economic performance, however, what is usually forgotten is that macroeconomic policy driven by the government also has strong effects on the performance of the market.
In 2016, oil prices collapsed and drove the Nigerian federal government into embracing protectionist policies that proved inimical to the performance of the capital market. Foreign investments have been falling off a cliff since then to an all-time low in 2022. Inflation and currency depreciation also made conditions worse for operating companies, especially in sectors where critical production inputs need to be imported for local manufacturing. This had profound effects as many of these companies that were listed on the then Nigerian Stock Exchange saw their share prices dropping, reducing their attractiveness to investors.
Due to the strong correlation between the capital market and oil prices, the market struggled to present a worthy value proposition to many of these multinationals who had foreign parent companies. The broader economy itself performed poorly as Nigerians saw their purchasing power drop consistently. It was therefore not unexpected that delistings would follow. Despite the advocacy efforts of the Organised Private Sector and capital market stakeholders including the Nigerian Exchange, the trend continued.
In a bid to spur competitiveness and innovation, the Nigerian Stock Exchange demutualised into Nigerian Exchange Group Plc with a structure that separated its operating exchange function from regulatory activities. This has yielded positive results. Since 2021, Nigerian Exchange Limited (NGX), the operating exchange subsidiary of NGX Group has embarked on developmental activities and deeper advocacy with the government and stakeholders.
For example, in December 2021, the Nigerian capital market had its first digital offering from MTN Nigeria Communications Plc which sold 575 million shares to retail investors in a transaction that saw more than 150,000 new retail investors crowded into the market, many of them Millennials, Generation Z and majority female. In 2022, NGX recorded a landmark power sector listing in Geregu Power Plc, which as at entry by introduction, added N750bn to the market capitalisation of the Exchange. The Exchange also secured a significant FMCG listing during the year, BUA Foods Plc which contributed to trading activity and boosted NGX’s market cap by N1tn.
Nigeria’s technology sector has experienced meteoric growth in the past decade. The sector has produced six unicorns and a listed company on the New York Stock Exchange. Seeing the significant growth in the sector, NGX created its Technology Board, after broad stakeholder engagement and approval from the Securities and Exchange Commission (SEC). The specialised board comes with lighter capital requirements, and less stricter governance requirements to encourage tech startups and other technologically inclined companies to list on NGX. It will provide visibility to the companies, and encourage investments from domestic investors and deepen the capital market.
NGX has also secured a partnership with Dubai Financial Markets to promote dual-listings. This will have profound effects as companies can access capital across both markets through a wider investor base. In 2023, NGX also secured major listings from notable investment firm, VFD Group and the Chapel Hill Denham managed Nigeria Infrastructure Debt Fund on its Main Board. This reiterates the attractiveness of NGX as a preferred listing platform despite the economic challenges.
Since the inauguration of the new administration led by President Bola Ahmed Tinubu, the Exchange has been neck deep in advocacy with the new government. Just recently in September, the Exchange embarked on a Non-Deal Roadshow to promote listings, tell the Nigeria story and improve deal flow into the capital market by showcasing it as a prime destination for foreign capital. During the Invest in Africa, part of the lineup of events in the Roadshow, the Minister of Communications, Innovation, and Digital Economy, Dr Bosun Tijani noted that FG will closely collaborate with NGX to stimulate startup listings through the Technology Board. The Chief Executive Officer, NGX, Temi Popoola also enunciated that the Exchange will lend its full support to FG as it aims to mobilise capital to finance its developmental agenda.
NGX continues to reinvent itself as the Nigerian economic demography shifts. The younger generation of Millennials and Gen Zs have affinity for digital assets and the exchange has noted that it is working closely with its regulator on key initiatives in that regard. The launch of a private market is also in the works to further encourage smaller non-listed companies do business with NGX. Free-zone companies are also on the exchange’s list of prospects, and NGX has hinted that it is working with regulators and the government to push legislature that will encourage these companies to list.
Listings remain the key avenue to drive sustainable growth for the Nigerian capital market and the moves by NGX recently show that they are not resting on their oars. It is also necessary that the federal government sees the advantages as more market listings will drive its tax revenue growth.
