TRADING ON SUCCESS

Nigeria 2019 | FINANCE | INTERVIEW

NSE has worked in areas such as technology, the market structure, business models, and regulations to ensure it properly services its issuers so they gain the financing they need to achieve their business objectives.

Oscar N. Onyema
BIOGRAPHY
Oscar N. Onyema was appointed CEO of the NSE and a member of the National Council in April 2011. He has 20 years’ experience in both US financial markets and the Nigerian information technology sector. He is Chairman of Central Securities Clearing System (CSCS) PLC, President of the African Securities Exchanges Association, and a Global Agenda Council member of the World Economic Forum. He also serves on the boards of all subsidiaries of the exchange, the National Pension Commission of Nigeria, and FMDQ OTC. He completed the Advanced Management Program at Harvard Business School, has an MBA from Baruch College, and a BSc from Obafemi Awolowo University, Ile-Ife.

What categories of assets have been traded the most recently?

Exchange-traded funds (ETF), for example, track various indices and commodities. The banking ETF returned 70%. This is consistent with the underlying index, which returned about 72%. A tracking error created the difference. The premium board index returned about 54%, and the gold ETF index returned a similar number. When people seek greater stability, they tend to move into gold. On the fixed-income side, the government issued a lot of debt to help finance the recovery. All in all, we have tried to create a platform that will support activity across asset classes.

Returns on government bonds in Nigeria have been high and have crowded out investment in corporate stocks. Do you see this situation changing in the near future?

It is a classic economic situation. There is a crowding-out effect that the government recognizes. It is one of the things that informed the pivot from the domestic debt market to the foreign debt market in order to allow firms to be able to raise money at a more reasonable price. The government has done a great job in trying to balance the ratio between the debt issued domestically versus foreign debt; it is still working toward the 60-40 ratio. At present, the government is probably closer to 30% of debt in foreign markets, enabling corporates to issue domestic debt. Importantly, the government is using its resources more efficiently and getting funds into the central bank. This has improved productivity in the economy.

How can the perception of the Nigerian exchange be enhanced in order for investors to also trade domestic stocks?

One of the reasons to invest in Nigerian capital markets is higher returns, and domestic investors are aware of that. Sometimes, people want to list their companies on the bigger markets, because they believe investors will gravitate there. However, they are discovering that those investors do not understand Nigerian businesses. More companies are starting to partner with us, and we have international agreements with other exchanges. We seek to work with bigger stakeholders to make sure we are servicing our issuers properly and they have the financing to achieve their business objectives. We have tightened up a number of things, such as technology, the market structure, business models, and regulations.

Indigenous oil companies have been advised to list on the NSE to attract more capital and further scale their business. What is the NSE doing to attract them?

Seplat's success opened the window for many oil and gas companies to walk the same path and achieve the same success. There were two critical factors: pioneer status and operatorship. Unfortunately, most of these companies did not get these two things before the 2015 political cycle and economic down turn started, so they could not enter the market. Domestic companies have a great deal to gain from listing here, from stronger corporate governance and better credibility and branding to better access to capital. A great deal of foreign capital flows to our market in search of quality companies. We provide a marketplace that is fair and just. If the macroeconomic situation is stable with growth, companies will list to finance their expansion and in so doing benefit a great deal from the Nigerian market.

What is your outlook for 2019?

We anticipate 2019 to be another good year, with people operating in an environment that offers more certainty, with hopefully more confidence in the economy and market.