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Nigeria’s stock exchange wants central bank to accelerate FX reforms

Chief Executive Officer of the Nigerian Stock Exchange (NSE), Oscar Onyema, has urged the Central Bank to accelerate much-needed reforms in the foreign exchange market in order to boost foreign investor confidence in the country’s capital market.

Onyema, who spoke at the 6th edition of the BusinessDay CEO Awards held virtually on Saturday, September 5, said he would like to see the CBN’s plan to collapse the multiple exchange rates into one credible rate fast-tracked.

“The CBN is already moving in the right direction but we need to accelerate the process,” Onyema said.

“We are already engaging with the monetary authority to resolve the fx shortages. We believe it is right for the market to determine prices.

“Having a single exchange rate that is market-determined may be painful in the short term but better for the economy in the long haul,” he said.

The FX shortages have been painful for businesses and investors and casts a cloud over an economy that contracted by 6.1 percent in the second quarter of 2020.

Onyema said the dollar shortages have seen local investors dislodge foreigners as the drivers of activity on the NSE for only the second time in five years.

The Nigerian stock market is down some 5.1 percent this year as the country grapples with the double whammy of lower oil prices and the COVID-19 pandemic.

The market downturn has not only taken a toll on the stock exchange but on companies that had lined up Initial Public Offerings.

“One area where we have struggled this year is with IPOs. A lot of companies that were looking to do IPOs have had to extend their timelines given the soft activity in the market,” Onyema said.

It’s however not all doom and gloom for the exchange.

Investors have piled into fixed income assets listed on the exchange, driving the total market capitalisation of the asset class to N16 trillion from N6 trillion, a sign that investors are increasingly lowering their risk appetite.

The New Gold ETF is another asset class generating significant investor appetite. It’s easy to see why. The asset has returned 72 percent this year, according to Onyema.

That’s perhaps the highest return of any asset class in Nigeria and is well above inflation rate of 12.8 percent.

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