Flying into Abuja, always leaves a bittersweet taste in my mouth.
It is an impressive city that can hold its own among the best in the world from D.C to Canberra, however, Abuja often seems distant from the pains of the rest of Nigeria.
Similar to a latter day Rome, that seems to suck the life out of the rest of the country with its unending bureaucracy, but I digress!
I was in town for the well-attended BusinessDay investing and capital markets conference, with the theme ‘Market recovery, innovation and regulation in Nigeria.’
Key Highlights
Solid showing from the Finance Minister
Capital market operators and investors were very keen to hear from the regulators, especially the Minister of Finance, budget and National planning who graced the occasion, about any potential catalysts that would turn around the negative sentiment which currently permeates equity markets.
They were not disappointed.
Some of the loudest applauses the Finance Minister Zainab Ahmed got during her Keynote Address at the conference was when she spoke about the 5 priority areas for her Ministry which include reforms of tax laws, following the reconstitution of the National Tax Policy Implementation Committee (NTPIC) to review various tax laws and produce a single draft Finance Bill 2019 to support FGN’s 2020 budget.
The Draft Finance Bill, which accompanied the 2020 Executive Budget Proposal submitted by President Muhammadu Buhari to the National Assembly on October 8, 2019 included five (5) strategic objectives aimed at achieving incremental but necessary changes to the country’s tax and fiscal laws.
Amongst these strategic objectives is the introduction of tax incentives for investments in infrastructure and capital markets, and specifically the introduction of Tax Rules to complement existing SEC Regulations for Securities Lending Transactions on The Nigerian Stock Exchange.
According to the Minister this particular strategic objective recognizes the crucial relationship between fiscal policy, the regulatory environment and strong capital markets.
Tough questions for NSE CEO, Onyema
The CEO of the Nigerian Stock Exchange (NSE), Oscar Onyema, was on the hot seat answering lots of tough questions from a range of investors, some of whom lost their investments following the takeover of hitherto listed Skye Bank, and others who are just sceptical of investing in stocks at all.
For the most part the NSE CEO, managed to navigate the questions and providing clear and thoughtful answers.
He noted that the NSE is not just an equity only exchange, but one that also trades bonds, exchange traded funds and REITs, and as such prospective investors should be well diversified across the various asset classes.
On the matter of equity shareholders of the defunct Skye Bank, who have been left holding the bag, Onyema explained that the process that led up to the takeover of the bank was a very complex one that involved multiple agencies, including the Central Bank of Nigeria (CBN), Nigerian Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC) Nigeria, among others.
Shareholders of the failed Alpha Merchant Bank are currently being compensated by the NDIC, and it was Onyema’s hope that it could be extended to Skye Bank investors.
PFAs as the whipping boys
There was almost a unanimous opinion that Pension Fund Administrators (PFAs) could be doing more to not only underpin equity markets but secure the long term capital gains for pension contributors.
With Nigerian stocks trading at the lowest valuation among emerging and frontier market peers including South Africa, Egypt and Kenya, PFAs are still largely underweight equities.
The most recent data from the regulator National Pensions Commission or PENCOM shows that PFAs exposure to domestic equities stood at 4.93 percent at the end of August 2019.
This compares with 40 percent for South Africa.
Haruna Jalo-Waziri MD/CEO of the Central Securities Clearing System Plc, argued that if Pension contributors are able to move from one PFA to another based on relative performance, it would help to engender competition in the space and get more PFAs to actively manage their portfolios rather than all of them being concentrated in Federal Government securities.
A presentation made by the NSE also showcased the importance of portfolio diversification across various asset classes and the fact that markets move in cycles, according to research.
A call for co-operation
Titi Odunfa Adeoye, CEO of boutique investment firm Sankore Investors, called for co-operation among all market operators to help solve the numerous problems facing Nigeria’s capital markets, from financial illiteracy to unclaimed dividends.
The Acting DG of SEC Nigeria Mary Uduk, also harped on the collaborative nature of the institution and how its functions and regulations cuts across numerous entities.
In all it was a lively, focused and educative set of discussions which showed a hunger for leadership and innovative actions to propel the Nigerian Capital Markets higher.
