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FMDQ OTC Securities Exchange CEO cautiously optimistic about 2018


Managing Director/Chief Executive Officer, FMDQ OTC Securities Exchange, Bola Onadele (left); Head, Efficiency Unit, Ministry of Finance, Ms. Patience Oniha; Director-General, Securities and Exchange Commission (SEC), Mounir Gwarzo; Chief Executive Officer, Chapel Hill Denham Group, Bolaji Balogun; and Head Investment Supervision Department, National Pension Commission, Ehimeme Ohioma during the launch of the DCMD Project at SEC’s third quarter Capital Market Committee meeting in Lagos.<br />

Bola Onadele Koko, CEO of the FMDQ OTC Securities Exchange joined CNBC Africa’s Onyi Sunday to review its performance this year and give an outlook for 2018.

I think the first thing that happened in 2017 would be in the foreign exchange market where the Central Bank to the delight of most market stakeholders introduced the investors and exporters foreign exchange window, where buyers and sellers once again are free to determine the exchange rates of their transactions.

Of Course, and market players would have seen the significance of the FX market. I mean the right FX market structure and it’s role in supporting trade and ensuring that the right things are done.

This has knock on effects on infrastructure and the greater things Nigeria wants to do. So, coming up with that FX market structure has gone some way to meeting the demands of the market. It’s a major milestone.

The same thing happened this year when the Federal Government took the Eurobond listing very seriously. For the first time again the Federal Government again did the right thing by dual listing the foreign currency bonds in London and on the FMDQ and the Nigerian Stock Exchange.

The debt capital market through the efforts of the securities and exchange commission also witnessed significant milestones. A lot of people in the market have been concerned about the posture of the debt capital market being presented as being only for the big investment companies.

Through the work done in the securities and exchange commission, now private companies can access bond markets in Nigeria albeit through bi-lateral private placement and even activity must be bilateral in basis.

That’s a major milestone because if you look at the infrastructure market in Nigeria, they’re dominated by private companies so it’s important that we don’t create a mismatch in terms of the assets and the funding and also the unnecessary pressure on the banking system balance sheet for activities like that.

Talk us through the numbers. Let’s look at the number of listings and quatations on the securities exchange this year.

On the bond side, if you look at the corporate bonds we’re looking at N70 something billion. Of course you typically won’t have the CFOs of the companies issuing out bonds when interest rates are high so we’re looking at 2018 for that effort. What most of them did was to convert to the commercial papers space this year, where we saw significant issues.

To date, close to N1 trillion in terms of the program register and they’ve been tapping these securities and issuing over N300bn.

So what happened this year was a switch from the long end because of the high interest rates to the short end where they sort of converted things to the floating rate. I think the CFOs of these corporate companies have been right because interest rates will likely drop in 2018.

What else is in your outlook for 2018?
2018 is going to be an interesting year, depending on perspectives. It’s going to be mixed. For FMDQ, our turn over last year in terms of trading was about N115 trillion. This year it looks like we’ll close at N140 trillion.

In 2018 we expect that turn over to be sustained. I expect us to go into the ripple market by Q1 2018. We’re going into the ripple market where the collateral will be managed and we would expect that that would give comfort to the market, especially the banks that are long cash. They’ll be able to give money to other banks because now their collaterals can be managed and their credits are secure. That will happen in 2018.

Of course we are also working hard on the interest rate derivatives. On the economy side, elections are coming in 2019 so Central Bank Monetary Policy Implementation and Management will be extremely important. The activities of Forex investors will be one to watch next year. Nigeria needs to quickly inspire confidence in the election process, the parties and the candidates. If they do this we don’t expect investors to take their money out.

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