- US institutional investors eye Nigerian capital market, urge regulatory reforms
BY FESTUS OKOROMADU, ABUJA
Africa’s total export is tipped to reach $1 trillion according to a new report by Standard Chartered.
The report titled “Future of Trade Africa Report,” highlights the prospects for trade in Africa and offers a perspective on the African Continental Free Trade Area as a vital driver for enhancing intra-African trade.
According to the report, Africa’s overall exports are projected to reach $952 billion by 2035.
Once the AfCFTA is fully enacted, there is the potential to boost this figure by an additional 29%, translating to an annual growth rate of 3% from the present until 2035.
The report further noted that an increase in intra-regional trade and improved connectivity will open new growth corridors for the continent.
Africa’s trade routes connecting to some of the most dynamic global regions are anticipated to surpass the global average growth rate of 4.3%.
The East Africa-South Asia corridor is poised to lead the way, projecting an impressive annual growth rate of 7.1% through 2035.
Additionally, the Middle East-North Africa and Middle East-East Africa corridors are expected to play a significant role, with their combined trade volume projected to approach nearly $200 billion by 2035.
The report surveyed 103 of Africa’s C-level and senior business leaders in the continent and the results of their response showed that Africa faces trade obstacles.
These include complex rules (63%), underdeveloped transportation (53%), ineffective facilitators (51%), and limited access to capital (46%).
Around 90% of respondents believe the AfCFTA can address these issues through initiatives like a reporting mechanism and trade acceleration.
Digitalization is vital for intra-African trade. Adoption of digital supply chain financing can unlock USD billion in export value in five key African markets by 2035.
However, 97% are interested in digital SCF solutions but face barriers like resource constraints, technology gaps, and interoperability challenges.
The Group Chairman of Standard Chartered PLC said of the report, “Implemented effectively, the African Continental Free Trade Area can radically reshape future growth and development. It will enable higher value-add supply chains and more diversified exports, allowing member states to reduce historical commodity dependence and achieve meaningful progress towards multiple Sustainable Development Goals.”
Meanwhile, institutional investors from the United States under the Institutional Investor Network have expressed interest in allocating their capital and exploring more direct investment opportunities in the Nigerian capital market.
This was the subject of discussion at an engagement between Nigerian Exchange Limited and a delegation from the United States facilitated by Chapel Hill Denham, consisting of the United States Agency for International Development, Prosper Africa and Power Africa.
During the engagement, which was marked by a Closing Gong Ceremony, the Chairman, Nigerian Exchange Group Plc (NGX Group), Umaru Kwairanga called for a deeper collaboration between the US and Nigeria.
The Chairman highlighted areas in which NGX Group has been engaging the government to further develop the capital market including removal of capital controls; legislation to enhance attractiveness of listings, pension reforms, policymaking to facilitate dollar-denominated market transactions, and the establishment of a private market. “Significant opportunities for mutual economic expansion abound between the United States and Nigeria,” he said, concluding that NGX Group is positioned to facilitate more investment inflows.
The Chief Executive Officer, NGX, Temi Popoola emphasized the innovative activities of the Exchange around catalyzing capital formation by both foreign and domestic investors.
“We are working hand-in-hand with the government to create an attractive environment for listings and also on product innovation that can creatively channel more funds into the market.
Popoola also mentioned NGX’s technology innovations including the Technology Board to encourage listings from tech startups, and digital market access that will spur the younger generation of Nigerians to invest in the market.
On his part, the Senior Investment Advisor, Prosper Africa, Cameron Khowsroshahi, who led the US delegation to Nigeria stated the openness of US institutional investors in working with Nigerian institutional investors including pension funds to explore more avenues to invest in the Nigerian capital market.
Whilst giving remarks, he noted that in the US, pension funds, some of whom were represented at the engagement, were allowed by regulation to invest 60 to 75% of their capital into equities and funds targeting equities.
Khowsroshahi urged the Nigerian stakeholders to work with the pension regulator to allow pension funds to inject more of their liquidity into the Nigerian equities market.
He also noted that there needs to be a new chapter in Africa and the U.S. economic relationship, adding that private capital from both sides play a pivotal role in achieving sustainable solutions for Nigeria and Africa.
Also speaking at the engagement was the CEO, Chapel Hill Denham, Bolaji Balogun, who expressed hope that the Nigerian market will emulate the US market as regards lesser risk aversion to investing pensions in equities.
Also, the Nigerian Exchange Limited bounced back on Wednesday, paring previous session losses, as the benchmark Index regained 0.17 percent to close at 67,100.49 points.
Investors’ interests in industrial heavyweight, BUACEMENT, alongside UBA and FLOURMILL which recorded 2.32 percent, 0.58 percent and 0.47 percent respectively offset sustained selloffs in Tier-1 banks, ZENITHBANK, GTCO, and ACCESSCORP declined of 0.63 percent, 1.82 percent and 0.32 percent respectively pushing the broader index into positive terrain.
As a result, the year-to-date return rose to 30.93 percent, while the market capitalization gained ₦63.52 billion to close at ₦36.86 trillion.
Analysis of Wednesday’s market activities showed trade turnover settled lower relative to the previous session, with the value of transactions down by 42.86 percent.
A total of 410.32 million shares valued at ₦4.46 billion were exchanged in 5,637 deals.
NEIMETH with a gain of 4.22 percent on its share price led the volume chart with 163.20 million units traded while ZENITHBANK whose price appreciated by 0.63 percent led the value charts in deals worth ₦1.02 billion.
Market breadth closed positive at a 1.15-to-1 ratio with advancing issues outnumbering declining ones. CORNERST up by 6.4 percent led 14 others on the leader’s log while OANDO down by 8.08 percent topped 12 others on the laggard’s table.
