The Nigerian Stock Exchange (NGSEINDX)’s Nasdaq OMX Group Inc. (NDAQ:US) trading platform will be operational by the third quarter of this year, said Chief Executive Officer Oscar Onyema.
The system is currently being tested, the CEO said today in an interview in Lagos, the nation’s commercial capital. Arunma Oteh, the head of Nigeria’s capital market regulator, said in December it would probably take all of 2013 to make the system functional.
The platform will allow the bourse, sub-Saharan Africa’s largest after South Africa, to trade options in 2014 and futures in 2015 to help deepen the market, Oteh said last year. Nigeria is targeting a $1 trillion market value for the exchange by 2016 from the current $67 billion estimated by Bloomberg. The Nigerian All-Share Index has advanced 23 percent this year, the best performance in Africa after Ghana and Kenya.
“We’ve seen a vote of confidence from foreign and local investors with regards to reforms that have taken place,” Onyema said. “The locals tend to be more momentum traders and so I believe they’re coming back in a faster pace than the foreigners who were the thrust to actually start to get the market going.”
Domestic investors, who accounted for as little as 33 percent of trading in 2011 after a market crash in 2008, have now flocked back to the exchange, overtaking foreign buyers with 58 percent of volumes last year, said Onyema.
The bourse saw 14 million naira ($88,523) of bonds traded on its retail investor platform last month, the highest amount since its February start, the CEO said. Trading was previously restricted to institutional investors through the over-the- counter market, where banks and brokers set prices with typical minimum trades of 100 million naira.
“We’re not where we’d like to be,” Onyema said. “If you think there are five million investors in the market place and if each one was to have balanced portfolios we should be seeing significantly higher numbers.”
New trading floor licenses aren’t being considered after media reports that the exchange is considering the applications from some global investment banks, Onyema said.
“We’ve seen a lot of interest from foreign broker dealers that want to access the market there directly and we are engaging them and talking to them and trying to find a way to get them to participate in the market,” he said. “It doesn’t mean they cannot buy other licenses.”
The bourse is waiting on guidelines to be approved by the Securities and Exchange Commission before it begins the process of demutualization and selling its shares, Onyema said. The exchange “engaged” the regulator on the issue last month and has asked them to make it a priority he said.
“There has been a lot of work done, there was an industry technical committee that put together proposed guidelines,” he said. “We’re waiting for the securities and exchange commission to act on that and give us guidelines so we can go out.”
There is concern that the fall in global oil prices could sour investor sentiment, said Onyema. Bonny Light crude, one of the main export grades of Africa’s biggest oil producer, fell 7.1 percent last month, it’s worst performance since May 2012.
“The Nigerian economy is highly correlated with oil prices and the stock market is quite reflective of the economy so yes we’re worried,” said Onyema. “We’re looking at it and we believe that one of the things we’re trying to do this year is to make sure the market is diversified enough” to withstand a drop in prices, he said.
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