Nigerian stocks seen needing more home investors

LAGOS Tue Mar 8, 2011 1:47pm EST

A view of the Nigerian Stock Exchange (NSE) on Kakawa street in the commercial capital of Lagos in this August 6, 2010 file photo. REUTERS/Akintunde Akinleye

A view of the Nigerian Stock Exchange (NSE) on Kakawa street in the commercial capital of Lagos in this August 6, 2010 file photo.

Credit: Reuters/Akintunde Akinleye

LAGOS (Reuters) - Greater domestic investment in Nigeria's stock market would boost its stability and insulate it from bouts of capital flight by foreign investors, the chief executive of Fidelity Bank (FIDELIT.LG) said.

Prices on Africa's third biggest equities market rose 12 percent in the first two weeks of January but nervousness about the political upheaval in north Africa and caution over Nigeria's April election have since all but erased those gains.

Fidelity Bank's chief executive Reginald Ihejiahi said in an interview as part of the Reuters Africa Investment Summit said the Nigerian market would benefit from a more balanced investor profile, with local investors less jittery about political developments and better able to place them in context.

"When you compare the local investors to investors coming from outside ... there will always be a gap in information, in terms of how you react to that information," Ihejiahi said.

"What is a surprise to one group of investors may actually be par for the course for other investors."

Nigerian share purchases by foreign investors rose 88 percent to $2.5 billion last year and the market remains sensitive to foreign investment flows.

Central Bank Governor Lamido Sanusi told Reuters on Monday he suspected some of the sell-down in the market in recent weeks was a result of nervousness over Nigeria's upcoming elections particularly in the light of events in north Africa.

"I think what has happened in North Africa means that people do think that if you don't have elections that are credible then you might have a backlash from the population," he said.

The ruling party candidate has won every election in Nigeria since the end of military rule 12 years ago and history is expected to repeat itself in April, with President Goodluck Jonathan considered the front-runner.

Previous periods of political uncertainty, most notably the illness of late President Umaru Yar'Adua in early 2010, had little impact on the capital markets and many Nigerians see the current jitters among foreign investors as irrational.

"A local investor can see that we have been through so many elections and, like everything in Nigeria, some of the negatives are far too hyped up," Ihejiahi said.

The head of the Securities and Exchange Commission told Reuters on Monday she expected growing participation by institutional investors, with collective investment schemes gaining a stronger foothold in Africa's most populous nation.

BANK GROWTH

Fidelity Bank has said it wants to expand rapidly to become one of the country's top three lenders both organically and through acquisitions.

It bid to buy local rival Afribank AFRIBAN.LG, one of nine lenders rescued in a 2009 bailout, but Afribank has since picked a private equity consortium as its preferred bidder.

Ihejiahi declined to comment on the bid, beyond saying it was part of a strategy to make "opportunistic" acquisitions.

He said Fidelity would continue to pursue organic growth to boost its retail business after adding 30 branches a year over the past two years and expand its corporate business.

"We are continuing with that momentum because we want to build a significant retail infrastructure and graft on top of it a significant corporate bank business," he said.

"As the economic begins to expand, we see better manufacturing opportunities for our core clients."

Fidelity has applied for an international banking license under new central bank guidelines which do away with universal banking licenses.

"Our view has always been that as the Nigerian economy settles, Nigerian businesses will expand across borders ... Our perspective has always been we would have to support our customers as they go along," Ihejiahi said.

(For more Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/ )

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