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Nairametrics’ Founder, Ugodre recently had an interview with the Head of Frontier Research at EFG Hermes, Kato Mukuro, on the state of the Nigerian Stock Exchange (NSE) and how the listing of Telecom companies like MTN Nigeria and Airtel Africa has rekindled interest in the market. Excerpt:

The listing of MTN Nigeria and Airtel Africa has led to a rekindled interest in the stock market, by a new generation of retail investors. What can be done to maintain that momentum?

We need to give these retail investors more stock. The exchange and all regulators need to impress upon the need to open the free floats of these businesses and all franchise assets trading on the exchange. We also need to have a very honest discussion on how we can bring margin lending back. There is no developed stock market in the world that does not offer margin lending to retail investors. We clearly need to be very careful about how this is done, but it must be done. Lastly, we need to continue to work on educating the public on how to value listed equities and market terminologies so that they are well informed before making decisions on what equities to buy.

Do you foresee a possible devaluation of the Naira, in view of the drop in crude oil price, and a large chunk of OMO securities mostly held by foreigners billed to mature in the next few months?

Like all other oil-exporting countries, the NGN/USD exchange rate is always vulnerable to weak oil prices. So, this is clearly a risk. Having said that, the bigger risk to the NGN is a return of local demand/consumption. For Nigeria to grow, it has historically imported, so if the new economic team is successful, they are going to need to focus on import replacement at the same time. If they do not, the NGN/USD will clearly be under pressure.

The Nigerian Stock Exchange (NSE) is currently one of the least performing in Africa. Do you see any possibility of a rebound before the end of the year? If so, what would be the factors, behind this?

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Although there is no obvious catalyst around the corner, I believe that the heavily discounted valuations of what we call franchise assets – industry leaders, like GTB and Dangote will open up an opportunity for a rebound before year-end.

However, I am not very convinced that this rebound can become a sustained rally in Nigerian equities until we see positive policy decisions coming out of the Executive Government and Central Bank. By positive, we mean policies that provide the market with comfort in the possibility of a return to macro-economic growth and visibility on the outlook of the naira.

The trading floor of the Nigerian Stock Exchange (NSE).


What’s your outlook for the rest of the year, in terms of GDP growth as well as inflation targets?


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We are expecting growth in the second half of this year to be very similar to the first half (c2% YoY real GDP growth). We believe that it will not be until next year when we will see some acceleration in growth. On inflation, we still expect to see it end the year in the low double digits (c11%).

Do you foresee a big 5 situation as insurance firms in the country make moves to meet the new capital requirements?

Not sure what is meant by a big 5 situation, but if you are asking if consolidation could come to the insurance industry, our answer is yes. It will most certainly happen, just as we saw with the banks. And during this process, we will see the leaders gaining significant market share.

How do global economic events such as the China-US trade war, US Fed rate cuts, Brexit affect portfolio inflows into Emerging Markets like Nigeria? Is it tailwind or a headwind?

It is hard to say whether the chicken or the egg comes first, but what is clear is that there is no egg without a chicken and no chicken without an egg. We live in a very interconnected world and cannot afford to ignore what is happening globally. Having said that, Nigerian equities can perform without global inflows if we successfully return retail investors to our market and convince our pension funds to increase their equity weightings.


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  1. Everything in Nigeria is nit predictable. Corruption and hardship everywhere. How can any foreigner invest in Nigeria when some of us that tried are trapped?
    Companies will declare dividend, investors shall fill all manner of forms and 6months, 1year, 1year and six months will pass with nothing to show. Is that how go on?


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