FX reforms have boosted valuation transparency for foreign investors

President, Association of Issuing Houses of Nigeria (AIHN), Kemi Awodein, has assessed the ongoing reforms in the foreign exchange market and submitted that they have substantially enhanced valuation transparency in companies and created a more attractive landscape for foreign investors to engage with the Nigerian economy.

She made the submission yesterday during the AIHN Annual General Meeting, in Lagos.

The Annual General Meeting (AGM) offered a platform for AIHN executives and members to review the association’s audited financial statements for the year ended December 31, 2023. It also included the presentation of directors’ and auditors’ reports, the reappointment of auditors, the authorization for directors to determine auditors’ remuneration, and the election of Taiwo Olatunji as Secretary of Treasury.

The account statement showed the association recorded N86.56m income in 2023 financial year, an improvement from N85.41m it achieved in the corresponding period of 2022.

All the executive committee members – Dr Gbadebo Adenrele (Vice President), Alhassan Gwarzo (Secretary of Finance), Abimbola Kasim (former Secretary of Treasury), Mrs. Onyebuchim Obiyemi (Secretary of Administration), and Chidi Iwuchukwu (Secretary of Publicity) – were present.

Awodein noted that the foreign exchange reforms played a strategic role in facilitating major transactions during the year, including Heineken’s $24 billion acquisition of a controlling stake in Nigerian Breweries and Sahara Group’s $1 billion purchase of Egbin Power.

“These deals were facilitated by the restructuring of the FX market, which improved valuation transparency for foreign investors,” she said.

Awodein added that the ongoing recapitalisation of banks, “has also supported growth in the equities market, which is a good development for the economy.”

She observed that 2023 marked a transformative year for Nigeria’s investment banking sector, driven by major economic reforms, including the removal of fuel subsidies and the unification of the exchange rate.

These reforms profoundly reshaped the financial landscape, boosting foreign investor confidence and improving market liquidity. Coupled with broader macroeconomic adjustments, they have redefined investment banking strategies, unlocking new opportunities in capital raising and mergers and acquisitions.

“The prominent transactions are Seplat Energy’s $650m bond issuance, aimed at expanding its energy operations, and Airtel Africa’s $500m capital raise, which was used to enhance telecommunications infrastructure. These initiatives were made more feasible by the improved economic environment following the reforms,” the AIHN president said.

She stressed the importance of improvements in transaction processing and time-to-market, highlighting them as key positive developments in the market.

Foreign portfolio investors are increasingly focused on the elevated yields from Treasury Bills and Commercial Paper, preferring these short-term returns over committing to long-term government bonds.

She disclosed that in first half of this year, the Nigeria Exchange Limited’s (‘NGX’s”) All-Share Index (“ASI) recorded an impressive return of 33.8 per cent, materially outperforming its African peers (Ghana Stock Exchange: +22.3 per cent; Nairobi Exchange: +18.9 per cent; Uganda Stock Exchange: 17.9 per cent; to mention a few).

“The market’s bullish run was buoyed by a confluence of factors, including robust corporate earnings, dividend declarations, and a heightened interest from both domestic and foreign investors.

“ Noteworthy are the listing of the Nigeria Infrastructure Debt Fund and Transpower, which significantly boosted market capitalisation on NGX positive market sentiment and was recorded across respective sectoral indices in first half of 2024,” Awodein said.

She also said that in the second half of 2024, “the anticipated drivers of the equities market are banking sector recapitalisation activities, completion of the Dangote Refinery, corporate actions, and the potential return of foreign portfolio investors (FPIs).”

Awodein said, “The banking recapitalisation has invariably created an opportunity for the growth of real investment and a deeper capital market. I look forward to furthering our discussions with other strategic market stakeholders such as the Central Bank of Nigeria, the Nigerian Exchange Limited, NASD Plc, Central Securities Clearing System, FMDQ Plc as well as other capital market trade groups.”

She added, “I am confident that constructive engagements will result in an upsurge in issuer interest and ultimately contribute to the deepening of the Nigerian capital market.”