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NSE to Unlock Investment Opportunities in ETF Market

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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.

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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.

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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.

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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 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 dipo.olowookere@businesspost.ng

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Economy

SEC Introduces Regulatory Incubation Program for Fintechs

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fintechs

By Modupe Gbadeyanka

A regulatory incubation (RI) program for financial technology (fintech) companies operating or seeking to operate in Nigeria has been introduced by the Securities and Exchange Commission (SEC).

A circular issued by SEC disclosed that this framework would be officially launched in the third quarter of 2021 and will operate by admitting identified Fintech business models and processes in cohorts for a one-year period.

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Participation in the RI program will encompass an Initial Assessment Phase and the Regulatory Incubation Phase.

The categories to be admitted into each cohort will be determined based on submissions received through the Fintech Assessment Form and communicated ahead of each take-off date.

SEC explained that the scheme was designed to address the needs of new business models and processes that require regulatory authorisation to continue carrying out full or ancillary technology-driven capital market activities.

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The RI Program has thus been conceived as an interim measure to aid the evolution of effective regulation which accommodates the innovation by fintechs without compromising market integrity and within limits that ensure investor protection.

It was disclosed that review of completed Fintech Assessment Forms will continue on an ongoing basis and those who consider that there is no specific regulation governing their business models or who require clarity on the appropriate regulatory regime for seeking the authorisation of the commission, are encouraged to complete the Fintech Assessment Form.

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Economy

NGX Suspends Trading on GTBank Shares Ahead of Delisting

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GTBank Branch

By Dipo Olowookere

In preparation for the eventual delisting of shares of Guaranty Trust Bank (GTBank) Plc from its trading platform, the Nigerian Exchange (NGX) Limited on Friday, June 18, 2021, placed the banking stock on a full suspension.

GTBank, a tier-one lender trading its equities on the exchange, intends to transform into a financial holding company (Holdco) so as to offer a wide range of services it is restricted to do.

Some years ago, the Central Bank of Nigeria (CBN) directed banks in the country to offload their subsidiaries not performing core lending services.

This was after many deposit money banks (DMBs) were delving into different business ventures, including insurance, stockbroking, asset management, amongst others.

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For the CBN, which regulates the banking industry in Nigeria, most of these banks were losing focus and were not supporting businesses that need funds to grow and then stimulate the economy in the process.

To address this issue, the apex bank asked banks to sell off their non-banking assets and this forced many of them to offload their companies not offering core banking services.

However, there was an opening for banks to still delve into other sectors within the financial and capital markets and this was by operating as a Holdco.

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A few of them towed this path, including FBN Holdings, Stanbic IBTC Holdings and FCMB Group.

Not wanting to be left out, GTBank is joining the party and to achieve this, it is delisting its banking arm, which is the popular GTBank from the stock exchange.

GTBank will now operate as a private company, while the new Holdco, Guaranty Trust Holding Company Plc, will now be a public company. The shares of this new firm will be listed on the NGX after the delisting of GTBank.

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Last Friday, the stock exchange informed the investing community of the latest development, announcing the suspension of trading on GTBank shares.

In the circular sighted by Business Post, the NGX explained that the rationale behind placing GTBank stocks on full suspension is to “prevent trading in the shares of the bank” in preparation of its “eventual delisting”

Before trading on its stocks was suspended on Friday, GTBank closed at N28.55 on Thursday after appreciating by 50 kobo or 1.78 per cent.

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Economy

DLM Capital Remains Best Structured Finance & Securitization Team in West Africa

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DLM Capital

A prominent developmental investment bank, DLM Capital Group, has emerged winner at the Capital Finance International (CFI) 2021 awards as the best-structured finance and securitization team in West Africa.

This award has been won consecutively in three years and affirms the group’s strong performance as a leading investment institution and asset manager.

CFI awards seek to identify the contributions of individuals and organizations that contribute significantly to the advancement of economies and truly add value for all stakeholders.

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DLM Capital Group creates bespoke business solutions for alternative financing and harnessing funds for growth.

The group focuses on four key sectors — consumer credit, agriculture, microfinance, and education with a mandate to reduce poverty and improve living conditions for Africans while mobilizing resources for the continent’s economic and social development.

“In the past three years, our portfolio management team’s performance has remained consistent, and our clients have benefited immensely from exposure to our solutions, including the NMRC securitization deal and the DLM Primero BRT Securitization,” said Head of Corporate Communications and Marketing, DLM Capital Group, Ms Chinwendu Ohakpougwu.

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“We are positioned to provide services to an expansive client base of retail, high net-worth and institutional customers.

“DLM Capital Group remains committed to constantly providing financial solutions that will enable our clients to make a difference, and we are honoured to be recognized once again as a reflection of the quality of support offered to our clients,” she added.

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DLM has won recognition in West African capital markets, acting as a sole arranger to over 80 per cent of structured finance transactions in Nigeria — and all the securitization transactions. It provides deal structuring, advisory execution and capital raising services across the Nigerian capital market.

The institution recently launched an asset financing scheme and is preparing a venture into digital banking under its subsidiary, Sofri.

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