Boosting ETFs in Nigeria’s capital markets

The Nigerian Exchange has hinted on the renewal in Exchange Traded Fund listings, with four new ETFs in the pipeline. Jude Chiemeka, Divisional Head of Capital Markets at the Nigerian Exchange, shared insights on the opportunities and challenges for ETFs in the Nigerian Capital Market and regulatory landscape in an exclusive interview with CNBC Africa. Chiemeka emphasized that Nigeria's ETF market is still in a nascent stage, offering immense growth potential and opportunities for both investors and issuers. However, he pointed out several challenges that need to be addressed to unlock the full potential of ETFs in the Nigerian market. One major hurdle is the lack of awareness among retail investors regarding ETFs, necessitating extensive investor education initiatives to increase adoption. Additionally, regulatory hurdles and cost inefficiencies for issuers pose challenges to the timely completion of ETF listings. Despite these obstacles, Chiemeka highlighted the significant growth potential of ETFs, citing global trends that have seen a surge in ETF popularity and assets under management over the years. He underscored the role of ETFs in portfolio diversification and performance enhancement, making a compelling case for increased participation in the asset class. Chiemeka also noted that Nigeria, with 12 listed ETFs, is positioned as the second-largest ETF provider in Africa and the largest in West Africa. The market capitalization in Nigeria's ETF space presents substantial room for growth compared to other African exchanges, indicating promising opportunities for issuers and investors alike. In terms of sustainability, ETFs offer a diversified investment approach, leveraging various asset classes from equities to fixed income and commodities. This diversity enhances investor safety during market volatility, providing a more stable investment option. As the markets brace for the second quarter of the year, Chiemeka expressed optimism about the outlook for the Nigerian capital market, citing undervaluation and attractive dividend yield prospects. He emphasized the importance of investing in stocks to beat inflation and leverage the potential for price appreciation. Additionally, he highlighted the increased borrowing expected in the fixed income space to support government deficits and corporate capital-raising initiatives. On a broader scale, the African Securities Exchanges Association's recent Memorandum of Understanding aims to enhance cross-border settlement of securities transactions and payments, fostering greater market integration and efficiency. In conclusion, Chiemeka's insights shed light on the evolving landscape of ETFs in Nigeria's capital markets, underscoring the opportunities for growth, diversification, and investor value creation.