The Director-General of the Securities & Exchange Commission (SEC), Lamido Yuguda at the weekend in Lagos lamented the lingering concerns over foreign exchange illiquidity that has forced many foreign investors out of the Nigerian equity market.
Speaking on “Sustainable Foreign Exchange Earnings: The Regulatory perspective,” at the 2022 edition of the annual conference of the Finance Correspondents Association of Nigeria (FICAN), at the weekend in Lagos, noted the 29.38% decline in foreign portfolio participation in equity trading on the Nigerian exchange over the last 15 years from N616bn to N435bn.
Yuguda, who was represented by Hafsat Rufai, a director at the commission, stressed the commission’s continued call for strategic initiatives to develop the capital market as a robust and sustainable source of foreign exchange for the country.
This, he said, is why the SEC has introduced new market-deepening initiatives and is implementing policies targeted at attracting foreign investments, such as a comprehensive review of rules on Collective Investment Schemes (CIS) leading to reduction of transaction and operational costs, better classification of funds for clarity, improved risk management measures, and several others.
The commission, he assures, continues “to advocate for a unified foreign exchange rate in order to attract more Foreign Portfolio Investments into the country. We appreciate the efforts of the Central Bank of Nigeria in exchange rate management and will support in whatever way we can to enable achievement of the objective of exchange rate stability.
He recalled that in 2021, “total domestic transactions accounted for about 77% of the total transactions carried out in 2021, whilst foreign transactions accounted for about 23% of the total transactions in the same period.
“According to data from the National Bureau of Statistics, he continued, the total value of capital importation into Nigeria in the second quarter of 2022 stood at US$1,535.35 million.
“The largest amount of capital importation was received through Portfolio Investments, which accounted for 49.33% (US$757.32 million). Foreign Direct Investments (FDI) accounted for 9.58% (US$147.16 million) while Other Investments stood at 41.09% (US$630.87 million).”
Giving a further breakdown, he said 55.8% or US$422.56 million, the largest amount of portfolio investment went into money market instruments, while Bonds followed with
42.5%, or US$322.04 million; and Equities, 1.68% or US$12.72 million) of
Portfolio investment in Q2 2022.
Besides efforts at “attracting more foreign investors into the traditional equities and bond markets, the Commission has also been committed to developing the commodities ecosystem as potent way forward in Nigeria’s quest for sustainable foreign exchange earnings and economic development.
Implementation of the capital market master plan, he believes, would ensure a vibrant
Commodities Trading Ecosystem in Nigeria that will support development of the agricultural sector and diversification of the Nigerian economy and, ultimately, advance the country towards attaining sustainable foreign exchange earnings.