Driving investments in Nigeria’s capital market

The Nigerian capital market is undergoing a period of transformation as analysts at Norrenberger Financial Group emphasize the need for sound economic reforms to stimulate investor interest. Pabina Yinkere, the Business Head of Asset Management at Norrenberger Financial Group, recently sat down with CNBC Africa to discuss the ongoing reforms in the market and the strategies needed to attract a larger pool of foreign portfolio and direct investments, as well as the latest trends in the pension fund space. Yinkere highlighted several key points during the interview that shed light on the current state of the market and its future prospects. One of the critical issues discussed was the government's efforts to boost investor confidence through various reforms. In particular, the recent reforms in the foreign exchange (FX) sector and the conduct of Open Market Operations (OMO) auctions were seen as positive steps to attract foreign investors. Yinkere acknowledged the initial optimism surrounding the FX reforms but also noted the challenges faced due to supply shortages. He expressed confidence that the normalization of interest rates on local fixed income instruments could make short-term interest rates more attractive to investors, thereby potentially luring foreign capital into the market. However, he emphasized the importance of addressing supply shortages in the FX market and clearing backlogs to instill confidence among investors. Yinkere also touched upon Nigeria's recent reclassification to an unclassified status and its potential impact on investor sentiment. While he acknowledged that the reclassification may not have a significant immediate impact due to prior portfolio positioning, he suggested that improving FX market liquidity could incentivize portfolio managers to reconsider Nigeria as an investment destination. With regards to future forecasts, Yinkere expressed optimism about the potential clearance of FX backlogs and the combination of various measures to stabilize the Naira. He estimated that the Naira could trade between 700 and 800 Naira against the US dollar in the coming months, contingent upon the resolution of existing challenges and the implementation of effective policies. In addition to discussing market reforms and currency outlook, Yinkere also delved into the performance of pension fund managers in Nigeria. He highlighted the substantial returns earned by pension funds this year, particularly those invested in equities. With the current high-interest rate environment, Yinkere pointed out the opportunity for pension fund administrators (PFAs) to lock in attractive yields and secure stable returns for the future. He emphasized the importance of monitoring inflation levels to ensure the preservation of real value for investors. Overall, Yinkere's insights shed light on the evolving landscape of the Nigerian capital market and the critical factors influencing investor confidence and market performance.