Can Nigeria’s equities market successfully rebound?
The decline of 16 percent in 2014 is spurring fund managers to take their pick of Nigeria's quality stocks, argues Elizabeth Ebi
World Finance speaks to Elizabeth Ebi, CEO of Futureview Group, on the potential for Nigeria’s equities market to successfully spring back from its lacklustre 2014, the economic impact of Boko Haram, and how the regulators’ efforts are preparing a stronger platform for foreign direct investment in Nigeria.
A rebound is expected for Nigeria’s equities market, this after a decline of 16 percent was recorded in 2014. Now here to shed light on these future prospects, Elizabeth Ebi.
World Finance: Elizabeth, thank you so much for joining us today. Tell me about some of the macroeconomic factors that contributed to the drop, and the successive uptake that followed.
Elizabeth Ebi: Our markets started very beautifully in the year 2014. Everything was in equilibrium, the exchange rate was in line, our inflation rate was as expected. We got good news from the National Bureau for Statistics that Nigeria had become the largest economy in Africa. Everybody was excited.
But then comes the third quarter; global markets started slowing down. China’s growth reduced, importation declined. Back home the production also was reduced, and that affected revenue inflow into the economy. The Central Bank of Nigeria (CBN) had to devalue the Naira in order to contain dwindling foreign reserves.
Boko Haram was threatening up north, with the insurgency. You are also aware that we are having elections right now: people are unsure as to what is happening for fear of currency risk. The foreign investors started taking off of the market, so that caused the market to decline.
When fund managers saw the rate of decline, they also saw opportunities. So they swooped on the market and began to pick up quality stocks again. So that saw the rebound towards the end of the year.
World Finance: Tell me about the recapitalisation efforts that have been announced by the Securities and Exchange Commission.
Elizabeth Ebi: As you are aware, our market is regulated by the Nigerian Stock Exchange and the Securities and Exchange Commission.
Since the global downturn, there has been a determination by both regulators to make sure that those organisations operate on world class standards.
For the stock exchange they have already put a robust platform – the X-Gen – to make sure that trades are executed seamlessly, efficiently, and transparently.
They’ve also ensured all their processes, corporate governance, everything is in line. And that’s why they were able to have been admitted into the World Federation of Exchanges.
With all of this in place, with a market as robust as that, it behoves the operators to have the right balance sheet, to have the right man power, to have the right processes in order to execute deals in a world class standard so that we have a perfect market.
World Finance: Everything that you say today Elizabeth, is imbued with this confidence in the ability for the market to really reassert itself and to continue this growth pattern. So investment prospects as a result you must also think are very positive for the country moving forward?
Elizabeth Ebi: We have the platform ready, the market is also in sync with these plans. The benchmark for lending has been set at 13 percent. We have inflation on a steady mode for the past 12 months. So it looks like everything is ripe!
We have Seplat shares selling at a discount of 61 percent, Dangote Cement at a discount of 40 percent, Nestle at a discount of 55 percent. That means that the market is ripe and is ready for investors.
However, I think what’s critical is for us to get this election right and have a proper transition, stabilise our currency; and we’re good to go.
World Finance: The government is going to play a decisive role, the future government that is. Tell me what sort of financial regulatory upgrades would you like to see put in place?
Elizabeth Ebi: The Nigerian Stock Exchange and SEC have really done so much to make sure we have all it takes in order to attract the world into Nigeria. And they already have a 10 year programme on what to do; and that takes off this year up to 2025.
So with all of that in place, I think what needs to be done is to make sure that we continue to stay focused.
I expect the government to provide all the necessary support, provide us with an enabling environment, a stable exchange rate, and a calm stable political environment so that people know that their monies are safe.
World Finance: Finally, what role would you like Futureview to play in the country’s growth in 2015?
Elizabeth Ebi: We’re looking at how we can support the economy. We are focusing on strategic alliances to help to deepen our products offerings, so that we can together support the growth areas in the Nigerian economy.
The oil and gas sector – there are a lot of companies that are struggling to raise finances.
We still have to explore our mining industry, which has a lot of potential to grow the market.
We are also looking at the agricultural sector: we have more than 70 percent of arable land that are yet to be cultivated. And the process, the value chain of agricultural production needs to be supported.
We’re also targeting those – the more than 70 percent of the population – that are the youths under 30, who are struggling to find their feet in the small and medium enterprises in the economy.
This is where we are as the time goes on. Futureview will continue to evolve, and as our name states we’ll always have the future in view.