Leading investment bank, Renaissance Capital (RenCap) with operations in Europe, Africa and Asia, is set to deepen its presence in the Nigerian investment industry in 2012 and beyond, with the launch of a range of fixed income offerings for the Nigerian market, as soon as April.
Rencap CEO for West- Africa , Yvonne Ike, gave the hint in a chat yesterday at Business Day’s Corporate Head Office. Ike intimated that the Africa- focused investment bank was set to shake up the Nigerian Bond Market with the expected launch of its fixed income products in April 2012. She stated her belief that finance plays a critical role in developing a country and would want to see a deeper role for finance in Nigeria.
Ike observed that the Nigerian Stock Exchange (NSE) had a market capitalisation of between N6 trillion and N7 trillion, whereas the Nigerian fixed income market had a capitalisation of over N14 trillion which was traded mostly Over the Counter (OTC), and outside the trading platforms of the NSE.
Recaps’ goal in launching its fixed income product would be to migrate some of that trading to a transparent exchange such as the NSE, while also helping to develop the corporate bond market and the nascent Repo (Repurchase Agreement) market.
The Repo market is the lifeline of Bond Market trading and Repos play a central role in providing liquidity for the vibrant trading and financing of Bonds. Repos also provide opportunities for Primary Dealer Market Makers (PDMMs) and smaller bond traders to manage liquidity and take risks in portfolio asset allocation.
The Rencap CEO stated that Nigeria and Ghana remain the focus of its West Africa operations, due to the high-growth potential of both countries.
According to her, if the power and infrastructure deficit could be bridged, Nigeria can achieve an average GDP growth rate of at least 10 percent.
For its Nigeria operations, Ike stated that Rencap was looking to focus on the fixed incomes market, Mergers and Acquisitions (M&A), Equities trading (where it is currently number 2 in the market), market making and securities lending, which describes the market practice whereby equity or debt securities are temporarily transferred by one party (the lender) to another (the borrower).
She observed that one of the major challenges facing the Nigerian capital market was low liquidity, which discourages foreign investors from being active there.
However, she believes that the reform programme of the current leadership of the Nigerian Stock Exchange, which aims to deepen and improve market liquidity by expanding the basket of investment product offerings, is a step in the right direction.
