Oscar Onyema, chief executive officer, Nigerian Stock Exchange in this interview with Ibrahim Apekhade Yusuf speaks on the challenges and prospects of the nation’s stocks market
The Morgan Stanley Capital International (MSCI) index threatened to remove Nigeria from the frontiers market. What’s your reaction to that development?
Well it has always been a risk right from when JP Morgan removed Nigeria from the emerging markets. So we’ve been concerned about it. The risk seems to have been heightened. We’re currently working to dimension what that means for us. I do know that there is about $480m that is exposed in Nigeria so a lot of that from that index but we haven’t concluded dimensioning what it really means in terms of capital outflow should they remove Nigeria from the MSCI frontier market. However, we intend to engage with MSCI and to continue to engage with the government to make sure that the concerns that they’ve raised are properly addressed.
The market has been suffering a lot of shocks lately. What is causing that?
I’m you’re very active in the market place. The global commodity price shock that has affected multiple countries has led to macroeconomic challenges and Nigeria is not an exception. We just went through a reporting circle. While a few of the companies did well, we did not get the kind of bumper harvests we’re used to so all of those things impact on the market.
As a result of FX rate, l’m sure you’re aware that a lot of the foreign portfolio investors have exited the market. But in the process of exiting the market it provides opportunities. I always say it when the market is doing badly you want to look at it closely because it provides opportunities. The Nigeria economy given our demographics, given the sheer culture of entrepreneurial growth that we have, it continues to remain an attractive growth story in spite of the fact that we’re going through short term difficulty right now.
It is a circle and I expect that we should view it as such. There is nothing that is happening today that has not happened before. We just need to look at new ways to approach the problem to make sure that we continue to drive confidence, especially investor confidence to participate in the market.
Do you see recovery before year end?
It’s difficult to predict this thing. What we know for sure is that market moves in circles. How long those circles are going to be is anybody’s guess.
What does the signing of the MoU with the London Stock Exchange portends for Nigeria?
We signed an agreement with the London Stock Exchange in November 2014. And the whole idea was to create a platform to jointly market companies from both countries to the rest of Africa and to the world at large.
For us it’s a very strategic move and it gives us an opportunity to help corporates that are looking to accelerate their growth to do that in a way that diversify risk because they are listing across two different geographies.
It allows them to generate activities both trading and value trading activities if you have two possibilities. So we’ve done a lot of work in the background to create harmonised processes that allows you to buy a stock in Lagos, sell it in London the same day. We couldn’t do that before.
So really this window allows companies to internationalise and offers opportunities for them to diversify their shareholdings structure. For us, we believe that it is a win-win between us and the London Stock Exchange and between us and the companies that will be coming on board.
But as you know the London Stock Exchange has a lot of African companies that are already listed. So it’s really also a window to create international flow of capital. So that dual listing catchment is not only Nigerian companies or African companies it’s also for African companies that are listed anywhere else now taking position on the continent.