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Nigeria exchange presses on with markets infrastructure overhaul

The Nigerian Stock Exchange has indicated that a decision over going public will soon be finalised, ushering in the investment it seeks to overhaul the country’s financial markets infrastructure and attract foreign investors.

The user-owned NSE is looking to break decades of influence from local banks and brokers by demutualising. Such a move would allow it to accept investments from outside parties and embark on a possible listing as it presses on with plans to build a clearing house and start trading listed derivatives.

“Our footprint is Africa — [the overhaul] is a catalyst for developing African markets,” Oscar Onyema, chief executive, told the Financial Times in an interview. “We’re looking at making sure investors have open access to markets, and make it easier for foreign investors to access the market.”
The exchange also has ambitions to attract more of its economy and population of 180m to its venue, a move that may put it into competition with the Johannesburg Stock Exchange for listings, an area where the NSE has struggled in recent years.


Mr Onyema, a former NYSE Euronext executive, has led efforts to rebuild the reputation of the NSE following allegations of financial mismanagement at the bourse in 2011. The JSE remains the largest venue in sub-Saharan Africa, with a domestic market capitalisation of $900bn, compared to the $49bn of the NSE.
To achieve its ambitions by a target of 2019, the NSE may choose to list after it demutualises, although indications have rarely come to fruition in the past seven years. Currently it is owned by 560 independent and corporate users.

 

The NSE is looking to change its corporate structure to accept either financial investors or conduct an initial public offering. Earlier this year the regulator devised a framework for demutualisation, suggesting that no single entity could own more than five per cent of the exchange’s equity and voting rights.

However, Mr Onyema would not be drawn on further plans.

“I don’t want to put a timetable on it but expect some news very soon,” he said at an event to promote the capital markets and links of Nigeria and the London Stock Exchange.

The exchange is also looking to build out its equities, fixed income and exchange-trade funds business and begin trading futures and options. It has already upgraded its equity trading platform with technology provided by Nasdaq. It also plans to build a clearing house, although it is still reviewing its plans.
“We want to have deep liquidity in all five asset classes,” said Mr Onyema, who added that investors were keen on tools to hedge against interest rates and foreign exchange moves.

Despite the country’s oil wealth, he said there was little initial demand for energy-related derivatives. “Even if you’re only doing a currency hedge, it can act as a proxy for crude.’’

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