NSE to Unlock Investment Opportunities in ETF Market

March 12, 2021
ETFs market

By Dipo Olowookere

Investors in search of new investment opportunities can consider the Exchange Traded Funds (ETFs) market for value creation, the Nigerian Stock Exchange (NSE) has suggested.

The market value of ETFs in Nigeria reached N24.5 billion last year and there is the possibility for it to grow bigger because a year earlier, the capitalisation was 270 per cent lower.

In 2020, the space witnessed significant increases in traded values and volumes (i.e., 218.0 per cent and 51,830.6 per cent respectively between 2019 and 2020).

The factor responsible for the rise was the adoption of ETFs, new product issuances as well as fungibility of some of the listed funds.

Since 2011, the supply-side has deepened from a single ETF tracking the price of gold to 12 ETFs currently offering exposure to equities, fixed income, commodities including Newgold ETF; Vetiva Griffin 30 ETF; Lotus Halal Equity ETF; Stanbic IBTC 30 ETF; Vetiva Banking ETF; Vetiva Consumer Goods ETF; Vetiva Industrial ETF; Vetiva S & P Nigeria Sovereign Bond ETF; The SIAML Pension ETF 40; Greenwich Alpha ETF; Meristem Growth ETF; and Meristem Value ETF.

Earlier this month, the NSE had discussions with issuers of ETFs as part of the exchange’s commitment to deepening activities in the segment.

During the meeting, which was held virtually, both parties discussed key development areas for the market, specifically in terms of product issuances, market liquidity, regulatory landscape and capacity building.

At the event, the Divisional Head of Trading Business at the NSE. Mr Jude Chiemeka, reaffirmed the exchange’s determination to work together with stakeholders to deepen the existing suite of available investments as well as improving the general landscape of the market.

He also expressed satisfaction with the improvements in the market, noting that ETFs are one of the fastest-growing capital-market investment vehicles in advanced economies, offering transparency, liquidity, diversification, and lower costs.

“For an emerging market like Nigeria, the ETF marketplace represents a meaningful opportunity to support the development of domestic capital markets, leading to greater price transparency, investor diversification, and liquidity across a wider range of instruments.

“Today, the NSE prides itself in its position as the second-largest ETF market in Africa with a market capitalisation of N24.5 billion as at December 31, 2020, up by 270 per cent from 2019,” he said.

ETFs are a type of investment fund very similar to the mutual fund. ETFs involve a combination of securities like equities, bonds, commodities, etc, in one basket, which can be transacted as a whole on the stock exchange.

Business Post reports that last year, when some foreign portfolio investors (FPIs) could not repatriate their funds from the country because of a shortage in foreign exchange as a result of a decline in crude oil prices, they turned to the EFTs market, buying the Newgold Issuer Limited ETF in Nigeria to sell in South Africa, where they could easily get FX.

This was one of the reasons the market witnessed a significant rise in transactions last year.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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