To meet the needs integral to the housing sector, whilst helping Nigeria meet its Sustainable Development Goals (SDGs), Nigerian Exchange Group (NGX) Plc says it intends to launch the impact board soon.
This is even as the group revealed that in 10 years, it raised over N72 billion for real estate companies quoted on its platform.
Its Group Chief Executive Officer (GCEO), Oscar Onyema, stated this during the 16th Africa International Housing show 2022 themed; “Housing for All-The Role of Governments in Creating an Effective Enabling Environment” which held in Abuja on Tuesday.
Delivering a keynote address titled “The role of the capital market in solving the housing problem in Nigeria”, Onyema noted that there is pressure on available housing and other infrastructure in urban areas as Nigeria currently faces a severe housing deficit as regards estimates by the Federal Mortgage Bank and the International Human Rights Commission (IHRC) which indicate a deficit of at least 28 million housing units.
He noted that despite the sector’s 5.34 per cent GDP contribution, the challenge in the sector remains, a far cry from developed economies where contribution to GDP is in double digits, depicting the interconnectivity between the housing sector and economic growth.
He said that although the government has embarked on various reforms and interventions in this sector to bridge the existing deficit, there is a need to adapt ingenious financing methods to meet the pressing need as the government cannot do it alone.
Whilst stating that the capital market remains an under-utilized lever for addressing the country’s housing gap, Onyema stated that Nigeria can draw lessons from developed countries such as the US, UK and Australia which have used capital market instruments to fund real estate projects.
“At the NGX Group Plc, we have invested in exchange platforms, market infrastructures, Fintech and a real estate company (NGX Real Estate). NGX Real Estate Ltd is focused on developing innovative solutions to the housing gap in Nigeria.
In the last decade, we have raised over N72bn ($175 million) on the Exchange for major real estate companies such as UPDC REITs, Abbey Mortgage Bank, and UACN Property Development Company through a mix of equity instruments including IPOs and rights issues”, Onyema revealed.
While adding that the Exchange has a market capitalization of about N23 trillion with a significant portion of this capital deployed to the infrastructure and housing sectors on the fixed income side, Onyema said the potential for the REIT and Mortgage Backed Securities markets have merely been scratched and bespoke instruments would aid capital formation to plug real estate financing deficit.
He said, “As we approach the eventual launch of the NGX Impact board, we would be providing the needed platform for issuing, listing and trading of sustainability debt instruments. This platform would support the listing of social bonds that would raise capital to meet the needs integral to the housing sector, whilst helping Nigeria meet its SDG commitments.
“We opine that the Pension Fund Administrators also have a part to play using the capital markets to ease the challenges in the housing sector given their over N13 trillion in Assets Under Management.
“The PFAs can increase their exposure to the housing value chain by allocating more resources to this sector in the form of equites, bonds, REITs etc pursuant to PENCOM investment guidelines”.
Exporters, investors total FX trade Up 17.6% to N30trn as coys quote N503.68bn CPs in H1
Amid expansion in business activities, data released by the FMDQ Exchange has revealed that total Exporters and Investors Foreign Exchange (I & E FX) transactions rose by 17.6 per cent to N30 trillion in the first half (H1) of 2022 compared to N25.52 trillion reported in the first half of 2021.
The Central Bank of Nigeria (CBN) in 2017 introduced the I&E FX window to further deepen the foreign exchange market and in 2021, it adopted the specialized window for exporters and investors as the official market rate.
With the increase in foreign exchange transactions, the Naira has depreciated against the US Dollar, with the exchange rate increasing by 1.06 per cent or N4.43/US Dollar to close at an average of N420.98/US Dollar in June 2022 from N416.55/US Dollar in January 2022.
Speaking on what will become of the FX rate in the second half of 2022, Financial Economist and Professor of Capital Market at the Nasarawa State University Keffi, Professor Uche Uwaleke in a presentation predicted of rising exchange rates due to the exit of foreign investors as well as increased demand for forex by politicians.
Analysts believe increasing business activities have played a vital role in demand for FX even as they maintained that the sustained interventions by CBN have curtailed further weakening of the local currency.
Commenting, Chief Operating Officer, InvestData Consulting Limited, Mr. Ambrose Omordion, attributed the growth to increasing demand for FX, maintaining that the global economy was expected to have expanded in 2022.
He predicted that activities might slow down amid political uncertainty in Nigeria and the crisis between Ukraine and Russia.
He said, “the Nigerian economy has witnessed more business activities in the first half of 2022 and demand for FX has increased significantly. The growth might be sluggish towards the end of 2022 over political pressure and Naira might depreciate further.”
Similarly, Analyst at PAC Holdings, Mr. Wole Adeyeye attributed the growth recorded in the total foreign exchange turnover in the first H1 of 2022 to increasing business activities and steady increase in global prices that has assisted the CBN in its numerous interventions.
He said that the slow growth in business activities in H1 2021 affected foreign exchange turnover transactions, attributing it to uncertainty and dwindling global oil prices.
He said: “The restrictions had affected investors and exporters’ demand for FX in H1 2022. The war between Russia/Ukraine affected capital inflow into the country and led to volatility in the foreign exchange market. However, with the ease of movement in 2022, investors and exporters surge for FX from the FMDQ market increased and it reflected in the amounts.”
In addition, analysts at Cordros securities in a report said, “In line with our 2022FY outlook, we maintain our expectation of increased demand for foreign currencies for service-based transactions.
“Our prognosis is hinged on the slowdown in virus cases and the effective reopening of the global economy. However, we expect the FX liquidity constraints and currency pressure to limit the services account deficit relative to pre-COVID levels.”
In another development, the FMDQ report disclosed that companies in the first H1 2022 quoted N503.68billion worth of Commercial Papers (CP) with over N2 trillion total outstanding value.
CP is a short-term debt financing securities (no longer than 270 days in tenor) consisting of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded.
Due to its relatively short maturity period, CP is referred to as low-risk investments and offering competitive returns to investors in compensation for the issuer’s credit risk.
Among key noted CP issued on FMDQ market this year was MTN Nigeria’s N127 billion Series 1 & 2 issuance under its registered N150 billion programme.
The Chief Executive Officer, MTN Nigeria, Mr. Karl Toriola explained that the N127 billion CP issuance would go into the record books as the largest CP issuance in Nigeria.
According to Toriola, “The success of our CP issuance is a clear demonstration of the strength and acceptance of the MTN brand and the trust placed by the investor community in MTN Nigeria’s company leadership, strong financial performance, and corporate strategy.”
The Managing Director, Highcap Securities Limited, Mr. David Adnori attributed the trudge in corporate raising CPs through FMDQ to urgent short-term capital obligations.
Speaking on the interest rate, he said: “Not that the interest rate on CP is low, its just that these companies need short-term funds to meet their daily business obligations. Some of these companies might be having a short fail in working capital. Short-term fund is to finance working capital to remain in business. Some might have short-term opportunities to grow their businesses and decided to take advantage of CP to remain buoyant.”
Meanwhile, the increasing total foreign exchange turnover at the FMDQ impacted on the Naira as it deprecated in May 2022.
The FMDQ report revealed that total Fixed Income and Currencies (FIC) transaction increased to N96.45 trillion in H1 2022, representing 4.8 per cent from N92.05 trillion in H1 2021.
FIC comprises of Foreign Exchange, Treasury bills, Open Market Operation (OMO), CBN special Bills, FGN Bonds, among others. As at H1 2022, FX transactions contributed 31.1per cent of the overall transaction at the FIC as against 27.7 per cent in H1 2021.
