Key Highlights
- The Nigerian capital market will see a renewal in ETF listings, with four new ETFs in the pipeline.
- The NGX is leading the ETFs market in West Africa with a market capitalisation of N8.87 billion ($19.25 million) but is still in its nascent state compared to South Africa.
- The SEC and CSCS are working to improve awareness and use technology to onboard retail investors into ETFs.
The Chief Executive Officer of the Nigerian Exchange Limited (NGX), Mr Temi Popoola, has said that the Nigerian capital market would see a renewal in Exchange Traded Fund (ETF) listings, with four new ETFs in the pipeline.
Popoola disclosed this at the NGX’s ETFs conference themed “ETFs in the Nigerian Capital Market: Opportunities and Challenges”, held on Wednesday 19 April 2023.
NGX leading the ETFs market in West Africa
The NGX CEO explained that the Exchange is leading the ETFs market in West Africa with a market capitalisation of N8.87 billion ($19.25 million). He, however, noted that the market is still in its nascent state, compared to the South African ETF market with a $7.11 billion capitalization.
- “There has been a dearth of new ETFs listings on the NGX in recent years, however, there are bright spots on the horizon with 4 new ETFs listings in the pipeline. It is incumbent to state that current macroeconomic challenges resulting in the exit of Foreign Investors, impacted the ETFs space which resulted in a sharp dip in the ETFs market Cap from 2020 highs of N24.5 billion. We are hopeful that the policy tilt of the new administration would impact positively on our market,” he said.
The need for awareness
The Executive Commissioner, Operations, Securities and Exchanges Commission (SEC), Mr Dayo Obisan touched on the challenges in the market but expressed confidence in the ability of experts to proffer solutions.
He urged all stakeholders including the Fund Managers Association, NGX, and other institutional investors to extend the message of ETFs to deepen the market and make the asset class more vibrant, thereby driving growth in the capital market.
The role of technology
Adeyinka Shonekan, the Executive Director, Central Securities and Clearing System (CSCS) Plc speaking on the CSCS’s developmental efforts in the ETFs market, explained how the CSCS was using technology to improve the onboarding of retail investors into ETFs.
- “CSCS has been driving the initiative to reduce the settlement cycle from T+3 to T+2 or T+1 and we have been engaging stakeholders to make sure we make this a reality,” he added.
Adele Hattingh, Manager, of Business Development and Exchange Traded Products at the Johannesburg Stock Exchange, JSE, gave an overview of the South African ETFs market including why investors should consider investing in the asset class.
What you should know
Exchange Traded Fund (ETF) is a type of investment fund and exchange-traded product that tracks the performance of an index or a basket of securities (such as shares, bonds, commodities, etc.).
ETFs are listed on a stock exchange and trade much like stocks. They provide investors with the opportunity to diversify their investments at relatively lower costs and gain exposure to different asset classes and strategies including Equities, Fixed Income, Commodities, Currencies, International Markets, Multi-assets, etc. With ETFs, investors can track global, country-specific and asset-specific indices.
The Nigerian Exchange (NGX) is the leading ETF market in West Africa and one of the largest in Africa in terms of its listed products, turnover value and market capitalization.
Since the first listing of a single commodity-backed ETF in 2011, some other equity-based and fixed-income ETFs have been introduced into the Nigerian bourse. NGX offers a fully electronic trading platform that delivers the benefits of deep liquidity, transparency and tremendous speed and efficiency.
