2014, a Good Year to Trade in Nigerian Stock Exchange

Economy - Despite concerns about Nigeria's political, currency and interest rate risks, the Chief Executive Officer of the Nigerian Stock Exchange, NSE, Oscar Onyema, has said the projections for the Nigerian capital market are largely positive for the year. Speaking on Wednesday to journalists and analysts at the NSE's yearly review for 2013 and outlook projections for 2014, Mr. Onyema said he is optimistic that Nigeria will get promoted to the emerging markets index.

"We expect Nigeria to be a key beneficiary of the MSCI 2013 annual market classification review, which will see Qatar and UAE (together accounting for 30 per cent), transition from the MSCI Frontier Markets Index

to the MSCI Emerging Markets Index. Cautiously, we will watch for the effects as Nigeria's weight in the MSCI Frontier Markets Index shifts from the current 13.8 per cent to 19.7 per cent, making it the second largest market in the index," he said.

But the NSE Chief said the movement to emerging markets should not be expected this year. "Our goal is to get promoted to the emerging market Index," he said.

He pointed out some specific criteria which must be met, to be qualified. One of them, he said is that the exchange would be on the watch list for over one year.

"It is not something that would happen this year," he said.

On the flipside, he said, emerging markets are more vulnerable to market sentiment than they were five to ten years ago, and Nigeria is not immune to the negative implications of higher yields, globally.

"The decision by the U.S. Federal Reserve to start cutting its monthly bond purchases, initially to $75 billion from $85 billion, is expected to have a residual effect on the Nigerian equity, bond and currency markets later in 2014, affecting foreign portfolio investment (FPI) and the strength of the naira against the dollar," he said.

On bonds, he said the heightened appetite for sovereign debt is expected to resurface in 2014, as the federal government seeks to reduce its domestic debt, flattening the bond market for states.

However, as Nigerian government bonds have historically offered high yields, this will remain an attraction for investors seeking those high returns.

"Meanwhile, we anticipate that the corporate debt market would continue to struggle as the cost of issuing corporate debt (long term) remains higher than accessing short-term debt from the banks" Mr. Onyema said.

"In line with the federal government's reforms, we anticipate achieving greater strides in our objective to support development of the real economic sector as a result of our new corporate strategic direction" he said, highlighting NSEs objectives and key initiatives for 2014.

He said NSE's five strategic objectives for 2014 - 2016, derived from the NSE's new corporate strategic plan are: increase the number of new listings across five asset classes; increase order flow in the five asset classes; operate a fair and orderly market based on just and equitable principles; champion the development of enabling laws and policies to drive capital market development; and diversify income streams.

"In 2014, the Exchange's primary focus will be on growing the capital market in preparation for achieving emerging market status. The NSE will facilitate access to and participation in the market; increase our footprint on the continent; and deploy a risk framework to safe-guard the market venue," he said.