New products and boards to deepen Nigeria’s capital markets

Nigeria’s capital markets ecosystem has made significant developmental progress in the last 10 years by growing the type of tradeable instruments and number of platforms available to carry out activity, which has brought more investors to the market. The years since 2017 have seen a particular push to diversify and strengthen the markets, and while participation remains low relative to the country’s large population, the sector is becoming increasingly sophisticated in terms of regulation and governance.

The Securities and Exchange Commission (SEC), the primary oversight body for Nigeria’s capital markets, has been shifting its focus from rules-based regulation to risk-based supervision. The latter was a guiding objective of the SEC in 2020 and into 2021 as it worked to ensure a fair and transparent market. Demutualisation of the country’s primary bourse has also been a major theme in the sector in recent times, and the process is gaining momentum.

Main Exchange

The Nigerian Stock Exchange (NSE) was founded in September 1960 and trading began in June of the following year. Its offerings include stocks, real estate investment trusts (REITs), closed-end funds (CEFs), debt instruments, derivatives, futures contracts and mutual funds.

At the close of 2020 the NSE had 161 listed equities, five listings within the REIT and CEF category, 12 exchange-traded funds (ETFs) and 133 bonds. Despite the business disruptions of the Covid-19 pandemic, various metrics show that the NSE had a relatively strong performance in 2020. As the year ended the NSE had a total market capitalisation of around N38.58trn ($103bn), divided between N21.06trn ($56.2bn) in equities and N17.5trn ($46.7bn) in bonds, representing respective annual growth of 62.42% for equities and 35.52% for bonds. ETFs, valued at N24.51bn ($65.4bn), were up 272.3% in 2020. The average daily trading volume of equities was more than 370m – 13.67% greater than in 2019 – while the average daily trading value remained more or less the same as the previous year, at N3.92bn ($10.5m).

The pandemic did, however, affect economic sectors differently, illustrated by a year-on-year (y-o-y) comparison of capital market performance by activity. In the third quarter of 2020 the sectors on the exchange that saw the largest y-o-y gains were agriculture (36.1%) and industrial goods (32.5%), while conglomerates (30.2%), and oil and gas companies (23%) recorded the biggest declines.

In the first nine months of 2020 market flows were 62% domestic and 38% foreign, with N510.25bn ($1.4bn) in foreign transactions. This compares to N942.55bn ($2.5bn) for the whole of 2019, when foreign transactions made up 49% of the total. The Securities and Exchange Commission has been shifting its focus from rulesbased regulation to risk-based supervision.


Prior to 2020 equities were traded on three boards: the main board, the premium board and the Alternative Securities Market (ASeM). The main board has three standards – A, B and C – each with its own requirements in terms of profits, market capitalisation and float share, among others.

The premium board is for companies that meet international best practices for corporate governance, as well as the NSE’s most stringent requirements for capitalisation – a minimum of N200bn ($534m) – and liquidity. Companies listed must free float at least 20% of their shares, or the value of their free-floated shares must be worth at least N40bn ($106.8m). As of early 2021 the premium board contained eight companies, of which four were in financial services, two in industry, one in oil and gas, and one in ICT.

The ASeM, for its part, is for fast-growing small and medium-sized enterprises (SMEs). Companies listed on this board are equipped with financial advisers, and benefit from services such as leadership development, succession planning and formalisation procedures. Four companies were included on the ASeM as of the end of 2020, spanning various sectors including oil and gas, construction and real estate, and pharmaceuticals.

A fourth board, the NSE Growth Board, was launched in January 2020. Listing high-potential businesses from start-ups to mid-sized companies, the board aims to facilitate access to credit for firms at the earlier stages of their lifecycle, provide investors with profitable returns and strengthen Nigeria’s position as an attractive investment destination. Companies on this board have access to a range of value-added services provided by the NSE, designated financial advisers, reduced fees and listing requirements, and faster approval times. There were five companies on the Growth Board a year after its creation: one each in ICT, conglomerates, financial services, consumer goods and waste management.


The exchange manages indices that include the All-Share Index; the NSE 30 Index; indices for the Main, Premium, ASeM and Growth boards; sector-specific indices; an Islamic index for sharia-compliant companies; and the Corporate Governance Index; among others. In 2020 the benchmark All-Share Index averaged 40,270.72 – 50% higher than in 2019. The NSE 30 Index, for its part, was up 39.25%. The strongest-performing index, however, was the Industrial Index, with a 90.81% gain. The only significant decline was recorded in the Oil and Gas Index, whose average dropped by 13.84% in 2020.

Showing variation during the year, the All-Share Index posted its 2020 high of 35,342 on November 12 – nearly 15,000 points more than the year’s low of 20,993.68 on March 13, two weeks before the government implemented a lockdown due to a rising number of Covid-19 cases. The index recovered to 42,412.66 by the end of January 2021; by comparison, its all-time high was recorded in early March 2008, when it reached more than 66,000 points.


The first half of 2020 ushered in a number of milestones for the NSE, particularly on its journey to demutualise the exchange. As the IMF describes it, demutualising a securities exchange is the process of transitioning from a “mutual association of exchange members operating on a not-for-profit basis to a limited liability, for-profit company accountable to shareholders”. The process is one that changes the governance structure and separates ownership – and therefore voting rights – from trading access on the exchange, which is opened up to more parties. In Africa, demutualised exchanges include those of Johannesburg, Nairobi, Mauritius, Seychelles, Rwanda, Casablanca, and the regional exchange of the West African Economic and Monetary Union.

Nigeria’s path to demutualisation began in earnest in 2015, according to Oscar Onyema, CEO of the NSE. Two years later members of the exchange voted to permit demutualisation, and the voter register closed in May of that year, meaning that the members as of that time will benefit from the demutualisation process as voting shareholders. In August 2018 the Demutualisation of the NSE Bill was signed into law, after which time work commenced on drafting plans for the process and submitting them to the SEC. The SEC issued the exchange a no-objection letter in December 2019, allowing the transition to move ahead.

Another step in the process occurred on March 3, 2020, when a court-ordered meeting was held and a unanimous vote was made to continue with the demutualisation. At the time, Onyema said, “Today’s meetings significantly move the demutualisation process forward, and the positive outcomes affirm the great interest from members to support the pivotal restructuring of the exchange to become globally competitive. In furtherance of our plans, we will move to file the necessary resolutions from the court-ordered meeting and all other required documents at the Corporate Affairs Commission and SEC, obtain the court-ordered sanctioning of the scheme [of arrangement], complete all necessary registrations and seek the final approval from the SEC to ultimately demutualise.”

The meeting in March 2020 decided a number of important aspects of the demutualisation. Specifically, the NSE is to be re-registered as the Nigerian Exchange Group, and the assets of the NSE’s current subsidiaries will be transferred to the new company. Moreover, the total share capital was set at N1.25bn ($3.3m) with 2.5bn ordinary shares of N0.50 ($0.001) each. An allocation of 1.96bn ordinary shares was also given to dealing members and ordinary members at a ratio of 78:22, respectively. The Federal High Court subsequently approved the scheme of arrangement for the demutualisation of the exchange in mid-May 2020.


There have been virtually no initial public offerings (IPOs) on the NSE since 2015. The IPO of telecoms provider MTN Nigeria, part of the pan-African group headquartered in South Africa, has been on the radar since 2016. That year MTN Nigeria was under scrutiny by the government for failing to disconnect unregistered mobile subscribers – a dispute that ended with the company pledging to pay more than $1bn in fines and list on the NSE. After continued clashes with regulators that saw MTN Nigeria miss multiple deadlines to list, the company was finally added to the exchange via a listing by introduction. Unlike a true IPO, where shares are floated to raise new capital, MTN Nigeria only listed existing shares: 20bn ordinary shares at N0.02 ($0.0001) each. Its decision not pursue an IPO stemmed from its assertion that it would be difficult to fairly value new shares, given it was in dispute with the federal government, which said MTN Nigeria owed $2bn in taxes between 2007 and 2017.

Another expected IPO did not go ahead as planned in 2019. Nigerian financial technology unicorn Interswitch, owned by London-based Helios Investment Partners, initially planned to go public in 2016, but suspended the move amid low international oil prices. In 2019 those plans were revived, with the company aiming to raise $1bn through the NSE and the London Stock Exchange by the end of the year. However, in October 2019 Interswitch instead decided to raise capital via a bond issue. In February 2020 Interswitch listed a N23bn ($61.4m), seven-year bond on the NSE that offered a 15% fixed interest rate as part of the company’s N30bn ($80.1m) debt issuance programme.

Corporate Debt

Dangote Cement was notable among the other corporate bond issuances in 2020. The company’s June N100bn ($267m) issuance, carrying a coupon rate of 12.5% and due in 2025, was 1.5 times oversubscribed and became the largest corporate bond listed on the NSE’s fixed-income market. As with Interswitch, the bond is one issue of a larger N300bn ($801m) corporate debt programme.

Other corporate debt issuances in 2020 included two bonds from agri-business firm Flour Mills and one from transport services company Primero. The former listed a three-year, N12.5bn ($33.4m) unsecured bond at a 10% interest rate, and a five-year, N7.5bn ($20m) unsecured bond at 11.1% interest. Primero, for its part, listed a N16.5bn ($44.1m) bond at 17% interest with a maturity date of 2026. Corporate debt issuances in 2020 totalled N192bn ($512.6m), and as of early 2021 there were some 30 corporate bonds listed on the NSE with maturity dates ranging from 2021 to 2033.

Sovereign Debt

As has been the case in previous years, the federal government dominated bond issuances in 2020, raising more than N2.36trn ($6.3bn) through various instruments, representing 92% of total debt issued that year. In terms of specialty bonds, the federal government issued Africa’s first sovereign green bond in December 2017 to fund environmentally sustainable projects. The N10.69bn ($28.5m) bond carries a 13.48% interest rate and matures at the end of 2022. Another bond issuance followed in June 2019 – due June 2026 – worth N15bn ($40.1m) at a rate of 14.5%. These were the only green bonds outstanding at the end of 2020.

Sukuk (Islamic bonds), meanwhile, saw movement during the first half of 2020. The government announced the issuance of a N150bn ($400.5m) sukuk in May, which was oversubscribed and brought in N162.6bn ($434.1m) for the rehabilitation of roads across Nigeria’s six geopolitical zones. The bond carries a 11.2% interest rate and is set to mature in June 2027. This is the federal government’s third sukuk to date, following issuances in September 2017 and December 2018 of N100bn ($267m) each. A fourth bond is on the horizon, with the Debt Management Office announcing in early November 2021 that a sovereign sukuk will be issued before the year’s end to finance critical road projects across the country. The federal government expects to raise N250bn ($667.5m), which would be the highest amount ever received from a single sovereign sukuk in Nigeria.

State governments can also issue bonds, but only if at least 60% of their revenue comes from internal sources, such as taxes. The majority of states in the country largely rely on financial transfers from the federal government and do not meet the 60% requirement. As of early 2021 there were around 15 state and local government bonds listed on the NSE.

Other Platforms

In addition to the main and alternative boards of the NSE, Nigeria’s capital markets include over-the-counter (OTC) trading platforms. FMDQ Group, formed by the Financial Markets Dealers Association, specialises in trading fixed-income securities, commercial papers, Treasury bills and bonds, derivatives and currencies; it also manages clearing and depository services. According to the group’s latest annual report, market turnover for 2019 amounted to N233trn ($622.1bn). There were 369 federal government debt securities valued at more than N60trn ($160.2bn) listed that year, among other instruments, and over $33bn in OTC foreign exchange futures were traded.

NASD OTC Securities Exchange, created by the National Association of Securities Dealers (NASD), is another OTC trading option for investors. Reflecting the challenging year the Nigerian economy as whole experienced in 2019, the latest annual report by the NASD noted that market turnover fell from N30.7bn ($82m) in 2018 to N10.48bn ($28m) in 2019.

Nonetheless, two new companies joined the market in 2019 by listing shares: VFD Group and Great Nigeria Insurance. The former is a financial services-focused proprietary investment company, while the latter provides a variety of insurance lines including life, fire and motor. The NASD also offers the NASD Enterprise Portal – or NASDeP – an online platform that enables high-growth companies to connect with venture capital, private equity and other accredited investors.

The AFEX Commodities Exchange – also known as AFEX Nigeria – became the first private sector-led commodities exchange in Nigeria in 2015 when it secured a licence from the SEC. Its trading platform was launched in 2017, along with weekly commodities price data, and in 2019 AFEX Nigeria introduced the country’s first commodities index that tracks maize, paddy rice and soybeans. The overarching mission of the exchange is to make Africa’s food systems more inclusive, scalable and efficient to the benefit of farmers and consumers, particularly by offering sales contracts to ensure farmers’ products reach the market – reducing post-harvest losses in the process. The exchange also works with partners to improve all steps in the agricultural value chain, and provides tools and financing mechanisms tailored to Nigeria’s agricultural environment.


Nigeria’s capital markets landscape has seen some significant changes over the course of recent years that should help it to better serve Africa’s largest economy moving forwards. The continued steps towards demutualisation and the launch of the Growth Board in 2020 will make the NSE more competitive, as will the implications of the 2019 Finance Act, which was implemented in February 2020. Under the act, multiple rounds of taxation on real estate investment schemes and securities lending were eliminated so that tax on earnings is only calculated and collected once – a move expected to boost the volume of these activities.

The wider investment landscape is also set to benefit from ongoing efforts to increase financial inclusion and promote awareness of the advantages of capital markets as an alternative to conventional banking when it comes to funding business expansion and growing and preserving individual wealth.

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The Report: Nigeria 2022

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