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1. Nigerian Capital Market at Crossroads; Working Towards a New Normal

Market brokers had an active trading period in 2022 as the equity market showed growth driven by domestic investors. Foreign investors left the Nigerian bourse in 2020 in the middle of the COVID-19 pandemic and backed out of opportunities to return to the country as foreign exchange incomes took a knock and repatriation of earnings became increasingly difficult. 

The fixed income market grew sizeably as the federal government went on a borrowing binge in 2022 as it attempted to plug the yawning budget deficit. The deficit widened as oil theft created a situation of dwindling foreign exchange revenues. The waters got a bit muddied when the state-owned oil company, the NNPC, refused to make remittances to the federation account monthly as was the previous practice, before its commercialization.

The new status of the company, argued its managers, did not make provisions for the payment of monthly inflows to the federation account, given its limited liability status and the rules under the newly signed Petroleum Income Act (PIA). The Act made the NNPC Limited, a company owned equally by the Ministry of Finance Incorporated and the Ministry of Petroleum Resources. The company was separated from its previous regulatory function and converted to a commercialized publicly-owned entity with a profit mandate and a commission to run along with best global management practices. 

The implication is that, like the Nigerian Liquified Natural Gas Limited (NLNG) operational framework, the federal government should expect only dividends from profit from the NNPC, and the payment of the approved federal taxes, fees, and levies. The implication is that the federal and other state and local governments would not receive monthly federation account allocations (FAAC) funded by the NNPC.

The trickle-down effect was and will continue to be a tightening of the various governments’ monthly wallets. concerning fixed income brokers, this is a boon as treasuries see larger traded volumes alongside more private commercial paper Issuances. But for equity traders, the outcome could be darker as higher interest rates lead to lower equity transactions as investors skip to debt and money market instruments as they try to head off the impact of inflation on their investment returns. 

In the new capital market age with artificial intelligence and machine learning (AI/ML) taking increasingly more important roles, brokers will need to acquire more advanced technology skills, particularly in data analytics and visualization. With technologies such as ChatGPT able to write concise reports on market developments, and distributed ledger technology (DLT). With technology scaling to achieve improved consumer service quality without human intervention, brokers will need to find better use of their times, sipping chilled coconut juice in the long-shaded alcoves of palm tree parapets in the Bahamas is an attractive proposition but is unlikely to happen. In the brawny streets of Nigeria’s urban jungle, ‘you must hustle if you wan chop!’ or in the more refined language of urbanites, “there is no food for the slothful””.