The Exchange Traded Funds (ETFs) market on the Nigerian Exchange (NGX) Limited has witnessed a substantial uptick, with a notable increase of N12.646 billion over the course of 11 months in 2023. This surge further cements ETFs as one of Nigeria’s rapidly expanding asset classes, falling under the classification of Collective Schemes.
In Nigeria, ETFs, categorized as securities that mirror the performance of an index or a basket of assets, have gained prominence as a relatively recent asset class. As of December 10, 2023, there are approximately 12 listed ETFs on the NGX. The NGX stands out as a leading market for ETFs in West Africa and ranks among the largest in Africa, considering its listed products, turnover value, and market capitalization.
The market capitalization of ETFs on the NGX has experienced a substantial rise, surging from N8.419 billion at the close of December 30, 2022, to a noteworthy N21.065 billion by November 30, 2023. Despite its growth, Nigeria’s ETF market remains comparatively modest on the global scale; however, it demonstrates consistent expansion with the introduction of more ETFs and a rise in trading volumes.
ETFs, being a type of investment fund and exchange-traded product that tracks indices or baskets of securities, present investors with an opportunity to diversify their portfolios at lower costs. These funds facilitate exposure to various asset classes and strategies, allowing investors to track global, country-specific, and asset-specific indices.
NGX, in collaboration with key capital market stakeholders, recently conducted a workshop addressing major challenges and opportunities in the ETFs market. Mr. Temi Popoola, CEO of NGX, highlighted the exchange’s leadership in the West African ETF market, acknowledging the nascent state of the market compared to South Africa’s $7.11 billion capitalization.
During the workshop, Mr. Dayo Obisan, the executive commissioner at the Securities and Exchange Commission (SEC), urged stakeholders to promote awareness and education about ETFs to deepen the market and enhance its vibrancy, fostering growth in the capital market.
Experts in the field, including Mr. Ambrose Omordion of InvestData Consulting Limited and Mr. David Adonri of HighCap Securities Limited, emphasized the growing demand for cost-effective, diversified, and income-generating investment instruments, positioning ETFs as a viable option. Omordion emphasized the need for increased awareness and education, while Adonri highlighted the benefits of ETFs in reducing risk and serving as a tool for portfolio diversification.