Capital Market experts predict greater future for Nigeria ETF market

The Exchange Traded Funds (ETFs) market on the Nigerian Stock Exchange has been tipped to grow exponentially given the support of every stakeholders including the regulators.

According to capital market advisors and ETF strategists who spoke at the ETF 2016 workshop in Lagos on Monday, the Nigerian  market has the potential for retail and institutional traded funds to flourish.

The workshop was organised by the Nigerian Stock Exchange in partnership with Stanbic IBTC Asset Management, Lotus Capital and Vetiva Fund Managers Limited.

An ETF is an investment vehicle that tracks an index, a basket of assets, or a commodity, but trades like regular shares on a stock exchange.

In his welcome address, the NSE Chief Executive Officer, Oscar Onyema, said that ETFs were introduced on the NSE in December 2011 with cross listing of Newgold ETF with AUM of N287.5m to provide investors with new opportunities to diversify their portfolios and access the market.

Speaking further, the CEO said, “As at today, we have recorded about 1,900 per cent growth in our ETF market with total AUM of about N4.24bn as at September 2016 on eight ETFs currently listed and traded on the Exchange.”

Onyema said that the eight ETFs in the market are Newgold ETF, Vetiva Griffin 30 ETF, StanbicIBTC ETF 30, Lotus Halal Equity ETF, Vetiva Sector Series ETFs- Banking, Consumer Goods and Industrial, and Vetiva S&P Nigerian Sovereign Bond ETF.

Speaking on the Fundamentals of Market Indices, The Executive Director/Head, Sub-Saharan Africa Client Coverage Team, MSCI, Mr. Gareth Allison said that investors need to understand the underlying assets before investing in any market.

According to him, ‘ETF aids investors to diversify their investments to an index, commodity, sector or region in the capital market’.

Allison further pledged that MSCI would assist the NSE to develop its ETF market. He said, “We want to help investors to utilise opportunity in the market and make maximum returns.”

According to him, indices were very important in investment decision, noting that, “Market is revolving, investors are revolving too, and we are faced with behavioural investors.”

In presenting her two papers via Skype, Nerina Visser, ETF Strategist and Advisor from South Africa distinguished between ETFs and ETNs and mutual funds. She noted that the ETNs carry greater risk. She said the ETFs give investors a higher level of certainty due to low cost.

Visser advised market regulators to understand the type of ETFs to develop to ensure investors patronage. She believes that products should be investors’ specific.

Visser said that market markers were needed to act as liquidity boosters for ETF to thrive in any market.

According to her, South Africa had the highest market for the product with 74 Exchange Traded Products across all asset classes. Botswana is in second place and Nigeria with 8 ETFs sits in the third position in the continent.

She commended the workshop which was organised to create awareness of the product, address its challenges and promote the opportunities in Nigeria and Africa.

Subsequently, Visser moderated a panel discussion which had Hajara Adeola,  MD, Lotus Capital Ltd, Shuaib Audu,  MD,  Stanbic IBTC Asset Management and Efiok E. Efiok, Head, Investment Management Dept. of Securities and Exchange Commission (SEC).

Other panelists are Oyelade Eigbe, Head Investments, Vetiva Funds Managers Ltd and Buki Abu, ETF Product Manager in the Nigerian Stock Exchange.

The panelists were optimistic that growth of ETFs in Nigeria has only just begun, and that it would get even bigger with the support of market intermediaries, stakeholders and regulator.

Experts have predicted the continued growth of the ETF industry, estimating that global AUM will reach at least seven trillion dollars by 2021.