The CEO of the Nigerian Exchange Limited, Mr. Temi Popoola, has claimed that the decline in the market capitalisation of Exchange Traded Funds listed on the exchange is due to the departure of foreign investors from the capital market.
The Punch reported that Popoola made this statement on Wednesday during a virtual conference titled ‘ETFs in the Nigerian Capital Market: Opportunities and Challenges’.
According to the report, he announced that four new listings were in progress.
Popoola highlighted in his opening remarks that even though the Exchange had a low market cap, it was leading the ETFs market in West Africa, with a market capitalisation of N8.87bn ($19.25m).
He also acknowledged that the market was still in its infancy compared to South Africa’s ETF market, which had a capitalisation of $7.11bn.
In his words, “There has been a dearth of new ETFs listings on the NGX in recent years, however, there are bright spots on the horizon with four new ETFs listings in the pipeline.
“It is incumbent to state that current macroeconomic challenges resulting in the exit of foreign investors, impacted the ETFs space which resulted in a sharp dip in the ETFs market Cap from 2020 highs of N24.5bn.
“We are hopeful that the policy tilt of the new administration would impact positively on our market.”
According to the report, the Executive Commissioner, Operations, Securities and Exchanges Commission, Mr Dayo Obisan, also addressed the difficulties that exist in the market during the event.
Exchange Traded Funds in Nigeria are investment funds that are traded on the Nigerian Stock Exchange, similar to stocks.
ETFs invest in various financial instruments, such as stocks, bonds, and commodities, and provide investors with exposure to a diverse range of assets.
The value of ETF shares fluctuates throughout the trading day, and investors can buy and sell these shares on the exchange like regular stocks.
ETFs are becoming increasingly popular in Nigeria due to their low fees, liquidity, and ease of trading, making them an attractive investment option for both retail and institutional investors.