NGX to diversify listings, attract tech companies

The Nigerian Exchange Group will in 2022 pursue a policy of diversifying the listings on its bourse, its chief executive officer has said.

The bourse will also introduce a Nasdaq-like Technology Board, targeted at attracting technology companies for listing, Temi Popoola, the chief executive officer of the Exchange, said at the weekend.

He spoke on a webinar by the NGX to review its operations in 2021 and present an outlook for the current year. He said the Exchange “is doing a lot” to encourage listing by companies.

The Exchange listed BUA Foods in January, and Popoola said more listings were in the pipeline. Sectors where the new listings are expected to come from include agriculture, power, and technology, he said.

He warned, however, that while more listings were being welcomed, there would also be delisting of currently listed firms, as the Bourse evaluates performances of companies.

The Exchange will also engage with companies operating in Nigeria’s free zones, Popoola said, noting that many of such companies cannot successfully operate in the equities space.

The purpose of the engagements is to find ways to support such companies, he explained.

Meanwhile, the Nigerian equities market has been described as one of the cheapest among the frontier markets, a feature that will keep it attractive to investors.

The local market has a price-earnings ratio of 7, and dividend yield of about 8 per cent, both of them being lower than its 10-year average, said Charlie Robertson, the Global Chief Economist at Renaissance Capital, an investment bank.

This is the ideal combination for local investors, he said. Robertson was one of the speakers at the NGX webinar.

Nigeria’s cheap stocks make the equities a better option to raise capital in the country, Robertson said, adding, “Equity is best for Nigeria to raise money to support growth,” stressing that the country cannot rely on only debt.

Commenting on Nigeria’s macroeconomic environment, Robertson said the current oil price of $90 per barrel would yield a current account surplus for the country, support the naira exchange rate and help reduce interest rates.

“If we assume our REER estimate is accurate, and that inflation will be about 10 per cent a year versus 1-2 per cent in the US, then the naira will need to depreciate by perhaps 7 per cent a year. This assumes productivity rises 1 per cent faster in Nigeria than in the US (debateable). This would put NGN fair value at around 700/$ in 2025 and NGN1,000 in 2030, that is slightly stronger in real terms than where it is today.

“If literacy and electricity rise as we hope, productivity gains could limit that annual depreciation to 5 per cent from 2024, putting the NGN at 880/$ in 2030,” he said.

Nigeria’s gross domestic product growth should be 3 per cent, and could rise to 4 per cent if oil stays at $90 per barrel, according to him.

He warned, however, that Nigeria’s high population growth rate would continue to keep the savings rate in the country low.