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Business News

Nigeria’s Capital Market: Equities, ETFs, Bonds and Beyond

The Nigerian capital market, like other global markets, will continue to be impacted by macroeconomic trends. Given the prevailing challenging economic conditions the country is facing, Nigeria’s equities market has experienced volatile daily gains and losses. #NSE #ETF

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The Nigerian capital market, like other global markets, will continue to be impacted by macroeconomic trends. Given the prevailing challenging economic conditions the country is facing, Nigeria’s equities market has experienced volatile daily gains and losses.

In any given week, the market could gain on Monday, decline on Tuesday and Wednesday, only to inch back up on Thursday and decline on Friday. Given this unpredictable nature of the market, investment professionals the world over agree that the best investment decisions are born out of patience, a careful review of market indicators and sound financial advice.

It is no secret that 2019 will see the equities market close the year on a bearish note with the Nigerian Stock Exchange’s All Share Index (NSE ASI) currently at –15.6% Year-to-Date (YTD). In a recent analysis by Mathias Althoff, Portfolio Manager at Tundra Fonder, the current state of the equities markets presents an opportunity for forward-thinking investors to come into the market with stocks trading at price-to-earnings (P/E) and price-to-book (P/B) ratios at 10-year lows.

The rationale is simple: a bear market is characterized by declining prices. It is more profitable to buy a stock when it’s cheap to say, N2.50 then sell when the price increases to N4.00, than to wait till the price rises to N3.80 only to sell at the same N4.00.

A careful analysis of historical performance will show that while a bear market is upon us now, the tide will turn. When it does, only proactive investors will be ready to ride the waves. Consequently, it is important that investors in the equities market are careful to neither hit the panic button and sell when stock prices begin to decline, nor go on a buying spree in the euphoria of rising prices. While it may appear counterintuitive, the legendary Warren Buffet did advise that as an investor, it is wise to be, “fearful when others are greedy and greedy when others are fearful.”

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Fortuitously, the capital market presents several other investment opportunities that also deliver competitive returns, while offering diversification and a degree of security. In 2011, The NSE introduced Exchange Traded Funds (ETFs) into the market to allow retail investors to diversify their portfolios, minimise risk and optimise returns. Much like mutual funds, ETFs can be made up of stocks, bonds, commodities, or even a mix of securities. The fundamental difference is that ETFs can be traded live on The Exchange just like regular stocks.

Currently, there are 9 ETFs listed on The Exchange – 2 thematic ETFs providing access to Pension-compliant and Shariah-compliant stocks, 2 broad equity market ETFs tracking the NSE 30 Index, 3 sector-based ETFs, 1 commodity ETF, and 1 bond ETF tracking exposure to benchmark FGN Sovereign Bonds. The beauty of the ETF, therefore, lies in its capacity to accommodate various risk appetites, investment objectives and strategies, and industry preferences. Furthermore, ETFs listed on the Exchange have a history of paying dividends which generate income for the investors.

The diversity and accessibility in today’s capital market also afford investors the option of fixed-income investments. In 2017, the Debt Management Office in collaboration with the NSE introduced the FGN Savings Bond allowing investors to come into the market with as little as N5,000.

This product has helped to debunk the primary myth that investing is the preserve of the affluent by opening up the market to all income classes. The FGN Savings Bond can also be traded in the Secondary Market on the trading platform of The NSE.

To truly enjoy the benefits of the capital market, investors – existing and potential – must be strategic in building strong portfolios that deliver gains in the long run. While equities often present the highest potential for gains, investors in this market must have a long-term view to maximise returns. It is, therefore, essential that investors explore other safer investment instruments such as ETFs, bonds, mutual funds, etc., which are all available in the market.

Ultimately, capital market stakeholders are working assiduously to deliver value to investors. The NSE on its part continues to deploy initiatives that maintain the highest level of regulation and protect investors’ interests including the: Investors’ Protection Fund (IPF) that will compensate investors with genuine claims of pecuniary loss against dealing members firms. Listed companies are also required to undergo the Corporate Governance Rating System (CGRS) that measures listed companies against the highest levels of governance and anti-corruption standards.

In its efforts to enhance market activities and increase access to information, the Exchange has made some noteworthy advancements. In 2018, the NSE launched the first African securities exchange artificial intelligence (AI) powered chatbot, X-Bot, that responds automatically to enquiries through Facebook Messenger. 2019 also saw the release of X-Mobile, a dynamic and user-friendly mobile app, to enhance investors’ participation in the Nigerian capital market.

 

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Coronavirus

Covid-19: U.S. donates field hospital worth $1.3m to Nigeria

The United States of America has donated a field hospital worth $1.3 million to Nigeria.

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NPHCDA to address infrastructural gaps in COVID-19 vaccine supply, FG to focus on procurement of Covid-19 vaccine in first quarter 2021

The United States has donated field hospital worth $1.3 million to Nigeria.

The U.S. has donated field hospital worth $1.3 million to Nigeria, in a bid to further contain the spread of Covid-19 cases and its related deaths.

According to a report by The Nation, the field hospital is located at the Federal Medical Centre in Jabi, Abuja.

The facility contains four fully equipped, negative pressure isolation facilities with the capacity to house up to 40 patients, an administrative unit, a 160-kw auxiliary generator, as well as other support equipment such as beds, sub-floors, showers and lavatories.

The facility was donated to the Nigerian Federal Ministry of Health by the United States Department of Defence’s U.S. Africa Command, with support from the U.S. Centre for Disease Control (CDC) and the Walter Reed Army Institute of Research (WRAIR).

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The facility was manufactured and built in the US by Alaska Structures, while a team of Nigerians assembled it in Abuja.

The facility was commissioned by the Minister of State for Health, Dr. Senator Olorunnimbe Mamora and the U.S. Ambassador to Nigeria Mary Beth Leonard.

What they are saying

Ambassador Leonard noted that:

“As we celebrate 60 years of U.S.-Nigeria diplomatic relations, and many years of health partnerships, it is deeply satisfying to look back on the many ways we have worked together to improve the health, safety and security of the Nigerian people,

“Supporting the healthcare workers who are caring for patients at this facility and across the country, is critical to Nigeria’s effort to slow the spread of COVID-19.”

What you should know

According to Nairametrics Covid-19 tracker, as of Monday 25th January 2021

  • The total number of cases stood at 122,996.
  • The total number of death stood at 1,507.
  • The total number of tests conducted stood at 1,270,523.

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Energy

Nigeria seeks technical support from UKNIAF to transform critical power infrastructure, projects

UKNIAF could help Nigeria transit from the ‘Transitional Electricity Market (TEM)’ to the ‘Medium-Term Electricity Market (MTEM)’.

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The Federal Government is in talks to partner with the United Kingdom Nigeria Infrastructure Advisory Facility (UKNIAF) to transform critical power infrastructure and projects.

FG intends seeking technical support from the facility, focusing on power sector policy reforms, Tariff reforms, DisCo audits, grid efficiency and sustainable off-grid renewable solutions.

This was disclosed by the Ministry of Power, after the Minister, Engr Salem Mamman, met with members of UKNIAF led by Program Lead for Power, Mr. Frank Edozie on Monday via its Twitter handle.

The Ministry of Power tweeted, “The Hon. Minister of Power @EngrSMamman held a meeting with members of the United Kingdom Nigeria Infrastructure Advisory Facility @ukniaf led by Program Lead for Power, Mr. Frank Edozie to discuss partnering to transform critical power infrastructure and projects.

“They discussed how the facility can be of help with providing technical support to @NERCNG, @TCN_NIGERIA, @realREANigeria & @nbetnigeria by focusing on, Power sector policy reforms, Tariff reforms, DisCo audits, grid efficiency and sustainable off-grid renewable solutions.”

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What it means

Aside from offering technical support to sector’s regulators and other agencies, the partnership, if it works, would help Nigeria transit from the ‘Transitional Electricity Market (TEM)’ to the ‘Medium-Term Electricity Market (MTEM)’ which involves increased generation competition and limited retail competition.

What you should know

The Hon. Minister was joined by the Director, renewable energy resources Engr. Faruk Yusuf Yabo, his Special Adviser on Policy @abbaaliyu_, his Technical Adviser on Strategic Coordination Dr. Nurain Hassan @inhassan and his Technical Assistant on ICT & Digital Communications.

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Appointments

International Energy Insurance appoints Ebunolu Ayeni as acting MD/CEO

International Energy Insurance Plc announces the appointment of Ebunolu Ayeni as acting Managing Director/CEO.

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Insurance in Nigeria, FBN Holdings Annual general Meeting, FBN General Insurance Limited CEO Bode Opadokun, FBN General Insurance Limited 2018 financial result

International Energy Insurance has announced the appointment of Mr Ebunolu Ayeni as the new acting Managing Director of the firm, following the retirement of his predecessor, Mr Peter Irene.

This is according to a disclosure signed by the firm’s secretary, Adeyinka Hassan and sent to the Nigerian Stock Exchange, as seen by Nairametrics.

The appointment of Mr Ebunolu Ayeni is sequel to the resignation of Mr Peter Irene, who until his resignation on December 20, 2020, was the Managing Director/ CEO of the firm. According to the notification, Mr Ayeni has immediately taken over the leadership of management in an acting capacity, in order to fill the void, pending the approval of the National Insurance Commission for the appointment of a substantive Managing Director.

Mr Ayeni is an alumnus of the University of Lagos, where he obtained a BSc. Degree in Insurance. He also has a Master’s degree in Marketing and Management from Ladoke Akintola University and Enugu State University respectively.

In terms of professional membership, Mr Ayeni is a fellow of the Insurance Institute of Nigeria, a member of Nigeria Council of Registered Insurance Brokers and the Institute of Loans and Risk management, Nigeria.

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What you should know

  • International Energy Insurance Plc provides insurance solutions to the energy sector. The company’s scope include; oil and gas, engineering/car, bond and finance among others.
  • International Energy Insurance Plc share price closed trading on 25th of January, 2021 at N0.38.

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