Presenting Nigerian Exchange Limited’s (NGX) 2021 Market Recap and Outlook for 2022 in early February, CEO Temi Popoola said the technology ecosystem would be a focus for NGX in the coming year.
“If we look across the continent, we will find that there are very few listings in the technology sector even through the news is awash with reports of capital raising. For us at NGX, we are asking how we can be the platform of choice for Technology players to access capital and we are collaborating with other players such as the SEC in this regard,” he said.
“One of the solutions we will be implementing is the launch of a Technology Board which will be better suited to the needs of Technology companies and will have flexible enough rules to allow them to approach our market for capital formation.”
He looked forward to strategic business reorganisation for the bourse, which is part of the NGX Group, including expansion to reach individual shareholders and digital transformation to bring more people into the capital market. He also promised a new focus on Environmental, Social and Governance (ESG) considerations and green finance.
A year of transformation and achievement
2021 saw transformation and achievement, including the Nigerian Stock Exchange’s successful demutualisation in March 2021. Nigerian Exchange Group Plc (NGX Group) is the holding company and has three operating subsidiaries: Nigerian Exchange Ltd (NGX), the operating exchange; NGX Regulation Ltd (NGX RegCo), the independent regulatory company; and NGX Real Estate Ltd (NGX RelCo), the real estate company. The NGX Group was listed by introduction on the NGX in October 2021.
Another key change in Nigeria’s capital market came on 9 December when NG Clearing launched Africa’s second central counterparty (CCP) clearing system for securities trades. This establishes a secure central operator to act as counterparty with all buyers and sellers and for risk management and it paves the way to introduce exchange-traded derivatives. Seven of these derivative contracts have been registered with the Securities and Exchange Commission for permission to trade them.
Speaking at the official launch, Zainab Ahmed, Nigeria’s minister for finance, budget and national planning said that the capital market has a critical role of meeting the nation’s infrastructure needs, including mobilising medium- to long-term funds crucial to economic growth.
Aisha Ahmad, deputy governor, financial system stability at the Central Bank of Nigeria, said the new central counterparty would help strengthen the country’s investment environment through solutions that systematically reduce risks, enhance operating efficiency, and minimise costs for all market participants, thereby contributing to national development. NG Clearing will also boost clearing and settlement of payment on trades among African countries.
Otunba Abimbola Ogunbanjo, Chairman, NGX Group Plc, added: “The availability of derivatives as an asset class contributes towards the development of a country by providing links between cash markets, hedgers and speculators. The primary purpose of a derivatives exchange is to provide liquidity and price discovery mechanisms to transfer the underlying risks among players with varying roles in an economy.
“The experience of emerging markets such as Thailand, Turkey, South Africa, as well as markets like Korea, Malaysia, Brazil and India, reveals that innovation and growth in derivatives activity over the past 20 years has yielded substantial benefits in terms of market expansion and overall economic growth.”
NG Clearing joined CCP12, the Global Association of Central Counterparties, as an observer member on 15 September. Kevin McClear, Chairman of CCP12, and Teo Floor, CEO of CCP12, said: “We are delighted to welcome the second CCP from Africa as an Observer Member of CCP12. NG Clearing will bring much value to CCP12, and we look forward to collaborating.”
All Share Index climbed 6.1% in 2021
According to Popoola’s February presentation, the NGX All Share Index climbed 6.1% in 2021, with the NGX Oil/Gas Index up 52.5% and the NGX Growth Board Index up 28.0%.
In May, Nigeria’s second-largest cement producer, BUA Cement, issued the country’s largest corporate bond, using the NGX and FMDQ exchanges to raise $276m in seven-year debt capital at fixed interest of 7.5%. The issue was oversubscribed by 38%. BUA aims to increase cement production to 20m tonnes per year in 2022.
Infrastructure investment was boosted by the October listing of the LFZC Funding SPV $25.2m corporate bond, which has 20 years’ duration – the longest in the market – and a 13.25% coupon. The issuer is a special purpose vehicle company sponsored by Lagos Free Zone Company. Its parent is Tolaram, headquartered in Singapore, which develops and manages the zone and leases land to enterprises. The bond is guaranteed by the Infrastructure Credit Guarantee Company.