Nigeria Bourse Chief Calls for Naira Clarity After Trading Curbs

  • Investment requires confidence in exchange rate, Onyema says
  • Tax breaks should be given to companies choosing to list

Nigeria’s stock exchange chief called for greater clarity on the naira and the new government’s fiscal policy as foreign investors stay away from Africa’s biggest economy amid currency trading restrictions.

“Investors don’t like uncertainty around the environment in which they are going to operate, uncertainty around the currency,” Chief Executive Officer Oscar Onyema said in an interview in London on Thursday. “We believe that the government is aware because it’s hearing it from multiple sources. We have made similar statements.”

While the central bank has limited the naira’s decline to 7.6 percent against the dollar this year by restricting access to foreign currency, Nigeria is under pressure to follow other emerging markets like Kazakhstan and Vietnam in devaluing its managed exchange rate. More than three months after taking office, President Muhammadu Buhari has yet to appoint a cabinet or give details about his economic plan.

The Nigerian Stock Exchange All-Share Index has dropped 15 percent this year. The currency, economic policy uncertainty and companies’ results falling short of expectations are the three main concerns of investors, Onyema said.

“It doesn’t matter where the exchange rate is as long as people are confident that the currency is going to be stable,” Onyema said. “That is the feedback that we’re getting from investors.”

Beyond the energy industry, banks have faced “extremely tough operating conditions,” Onyema said. “If you look at other sectors, oil and gas, and fast-moving consumer goods, the corporates are just beginning to turn around.”

Worsening Profit

Nigeria’s banks will see smaller profit and asset quality, with industry non-performing loans likely to rise above an informal central bank cap of 5 percent, Fitch Ratings said last week. The Nigeria Stock Exchange Banking 10 Index has declined 14 percent this year.

While domestic investors account for 75 percent of stock ownership, 60 percent of trading activity is done by foreigners, Onyema said at the Nigeria Capital Markets Forum in London today.

“The central bank has a job to make sure there’s confidence in the currency and they’re doing their best under the circumstances,” said Onyema. But “investors must believe in what you’re doing -- it takes two to tango.”

One fiscal measure Onyema is looking for from the new administration is tax breaks for companies choosing to list and higher taxes for those deciding not to. Listed companies tend to pay around 65 percent more of their earnings in taxes as they’re held to higher standards of disclosure, he said.

A bill in parliament that would compel companies to list should be “changed dramatically so you give incentives” instead, he said.

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