Oscar Onyema, ASEA president and managing director of the Nigerian Stock Exchange, exposed that the costs associated with listing companies, especially SMEs, deterred them from the capital market, which is why African exchanges are creating alternative markets in line with best global practices to make it easier for SMEs and growing companies to list and raise capital to meet their growth objectives.
He asserted that ASEA is the premier association for leading exchanges in Africa, and it seeks to develop member exchanges, through Building African Financial Markets’ (BAFM) annual capacity-building seminar, driven by ASEA, in collaboration with its member exchanges by providing a platform for networking and knowledge transfer.
“Furthermore, ASEA signed an MoU (memorandum of understanding) with the Financial Sector Deepening (FSD) Africa, which will provide ASEA with technical assistance to the tune of GBP 160,000 aimed at: i) supporting our Annual ASEA Conference, ii) boosting capacity of the ASEA secretariat, and iii) enhancing the ASEA website into a richer information portal,” he added. Below is an interview with Onyema, discussing the potential of growth for African markets.
African stock markets face some difficulties in attracting more companies to list, especially SMEs. What are the difficulties that dissuade companies from listing and how are you working to solve these sorts of problems?
SMEs in Africa are often deterred from the capital market by the costs associated with listing as well as pre- and post-listing requirements of securities exchanges.
In light of this, African exchanges are creating alternative markets in line with best global practices to make it easier for SMEs/growth companies to list and raise capital to meet their growth objectives.
In addition, ASEA, in collaboration with the African Development Bank (AfDB), established a small and medium-sized enterprises (SME) facilitation working group in 2016 to explore ways to support the capital raising efforts of African SMEs. I am pleased to announce that the working group has successfully completed the Case Study of the AfDB Local Bond Issuance on African stock exchanges and the study report will be launched in the course of the 2017 ASEA annual
At the Nigerian Stock Exchange (NSE), we offer multiple tracks to listing, aligned with the capital needs and funding life-cycles of our SMEs. From a deal-origination perspective, the NSE’s Domestic Primary Market team perform an advisory function for potential issuers. Furthermore, the NSE provides value-added services such as institutional services, analyst coverage, investor relations, corporate governance, and corporate access.
What is ASEA’s role in raising financial knowledge or access to finance?
As the premier Association of leading exchanges in Africa, one of our primary goals is to develop member exchanges, by providing a platform for networking and knowledge transfer. One of the ways through which we do this is the Building African Financial Market (BAFM) annual capacity-building seminar, driven by ASEA in collaboration with its member exchanges. BAFM seminars offer a unique opportunity for delegates from stock exchanges, brokerage firms, regulatory authorities, issuers, the investor community, and other stakeholders to share knowledge and keep abreast with market developments. In April 2016, the NSE hosted the 5th edition of the BAFM, marking the first time the event was held outside of South Africa. It was attended by over 160 people from 12 countries. Following its success, the 6th edition in the series was hosted by the Casablanca Stock Exchange (CSE) in 2017. The BAFM continues to gain momentum and attract growing participation across the continent.
The annual flagship ASEA Conference, as well as other seminars hosted by African securities exchanges, are also useful platforms for raising financial knowledge and offering solutions on enhancing access to African capital markets. Last year, the annual ASEA conference was hosted by the Rwanda Stock Exchange (RSE) in November 2016, and this year’s conference, as you know, is being held in Egypt.
The Association also continues to form strategic alliances with globally renowned institutions including Chartered Financial Analyst (CFA) Institute, and the Chartered Institute for Securities & Investment (CISI). These partnerships allow market players in the ASEA community to enjoy international certification programs at discounted rates, and will go a long way towards raising the standards of professionalism within ASEA Member jurisdictions, enhancing investor confidence.
How could ASEA enhance foreign inflows to the markets of all members of ASEA?
In 2015, ASEA initiated the African Exchanges Linkage Project (AELP), in collaboration with the AfDB, with the aim of addressing illiquidity in African markets. The project, which initially commenced with four pilot exchanges, namely: CSE, Johannesburg Stock Exchange (JSE), Nairobi Securities Exchange (NaSE), and NSE, now includes two additional
exchanges, namely: the Stock Exchange of Mauritius (SEM) and Bourse Régionale des Valeures Mobilières (BRVM).
We also signed an MoU with the FSD Africa, which will provide ASEA with technical assistance to the tune of GBP 160,000 aimed at: i) supporting our Annual ASEA Conference, ii) boosting capacity of the ASEA secretariat, and iii) enhancing the ASEA website into a richer information portal.
In Nigeria, the NSE actively engages the government, advocating for policies that engender further development of the Nigerian capital market, including improving ease of doing business (ease of registering companies, raising capital, entry of goods and services, entry of people), accommodative tax policies, and resolution of tax challenges within some of the NSE’s products frameworks, and so on.
What is ASEA’s strategy till 2027?
Our focus as an association remains on exploring ways through which we can deepen the African capital market and improve the status of the association to drive the economic and societal transformation of Africa. Looking ahead, ASEA will continue to work to position African markets as the key to unlocking the continent’s socio-economic growth potential. As an advocacy voice for African exchanges, ASEA will forge more strategic partnerships and influence policy-making decisions that will drive the strategic agenda of the association. The association will also continue to explore other avenues to diversify its revenue streams, and through enhanced publicity and directed marketing activities, we will strive to enhance the prominence of the association.
What is your outlook for African stock markets in the next decade in terms of percentage of GDPs, daily turnover vs the global number of listed securities?
Capital markets move in cycles so we are pleased to observe the market recovering from the impact of the subdued growth in several African countries due to low commodity prices and slowdown in advanced economies and emerging markets such as China. We look forward to admitting more full, observer, or associate members to ASEA, as well as securing more strategic partnerships that will support the aspirations of the association.
What does ASEA do for its members?
- Enhances the visibility of ASEA members globally with a view to attract capital inflows to African capital markets;
- Provides an authoritative information portal on African public markets through the ASEA website (www.african-exchanges.org/en/statistics);
- Provides powerful lobbying and advocacy voice for member exchanges;
- Promotes market development among member exchanges;
- Promotes capacity building and training for member exchanges; and
- Initiates Strategic Alliances on behalf of member exchanges.
What about NSE, number of listed companies, new IPOs, your plans for developing the market, and new financial tools, market cap?
Below are some key statistics (as at November 17, 2017):
- Number of listed companies: 166
- Number market cap: N20.67Tn ($67.53bn)
- Equity market cap: N12.79Tn ($41.78bn)
- Bond market cap: N7.87Tn ($25.72bn)
- ETF market cap: N6.48 Bn ($21.19mn)
In terms of the future, the NSE will continue to execute its strategy and we look forward to achieving its primary initiatives, namely, derivatives and demutualisation. We hope to take advantage of our demutualised state to better serve the needs of our customers and achieve the highest level of global competitiveness. The NSE will continue to push for new listings (i.e. FGN Green, SOEs and Diaspora bonds, etc.) as well as engage with larger capital market ecosystems for the market-wide implementation of a competitive pricing structure. In the area of sustainability, the NSE is looking to introduce sustainability disclosure guidelines for issuers.
Finally if possible to provide, what are ASEA’s last statistics?
ASEA statistics can be accessed via the ASEA website (www.african-exchanges.org/en/statistics).