LAGOS Nigeria's stock exchange plans to create an index for fixed income securities by the end of the second quarter and plans to widen trading hours to attract more U.S. investors, its interim chief executive said on Thursday.
Analysts say an index will help encourage more active trading in the bond market and could improve transparency in the pricing of debt instruments in Nigeria.
Interim Administrator Emmanuel Ikazoboh said in an interview as part of the Reuters Africa Investment Summit that he was working to encourage the listing of government bonds, which are currently largely traded over the counter and expects more of Nigeria's 36 states to issue bonds in the coming months to finance infrastructure.
The southwestern state of Edo is expected to conclude issuance plans next week.
"We are trying to encourage even the local governments to raise municipal bonds. By raising bonds and money from the capital markets you are forced to repay those and be transparent," Ikazoboh said.
"So it has a dual purpose. The advantage is that it will bring transparency to our governance process, it will also be beneficial to our infrastructure development."
Nigeria runs a three tier system of government -- federal, state and local -- with federal and state government bonds accounting for over 95 percent of the debt market.
AMCON, a state "bad bank" set up last year to absorb non-performing loans in the banking sector, has said it will list it bonds on the exchange and create hedging opportunities by allowing short-selling.
"Trading bonds on the floor of the exchange will ... ensure the right prices are actually determined," Ikazoboh said.
SHARE PRICE CAPS
The exchange will widen its trading day for a second time to seven hours -- from 9:30 a.m. to 4:30 p.m. -- in the next two months to try to attract more foreign investors, particularly from the United States, Ikazoboh said.
Nigeria's stock exchange, the third largest in Africa after Egypt and South Africa, extended its trading day by two hours in December to try to boost liquidity.
Ikazoboh said volumes rose by a quarter and the value of deals by 15 percent in the first two months after that move.
He said the bourse was also looking at removing a 5 percent cap on individual daily share price movements, which he said was keeping a lid on volumes, and had done various studies to determine the effect on the market.
Nigeria has said it plans to demutualise the bourse, turning it into a listed company to make it more competitive and giving it a greater incentive to introduce profitable new products.
But Ikazoboh said the exchange needed some restructuring ahead of those plans, including changing its council to a board of directors and reviewing the corporate governance structure, and regulators have visited Brazil, Malaysia and South Africa to look at their various models.
Ikazoboh also said he expected a few new listings with initial public share offers (IPOs) in the second half of the year, after Nigeria's elections, but that more would start "trickling in" in 2012.
New issues dried up after a 2008 stock market crash and banking crisis which led to the near-collapse of nine lenders before the central bank stepped in with a $4 billion bailout.
Ikazoboh said new IPOs had struggled to get off the ground due to a loss of confidence and the lack of credit flows after the collapse but the situation was changing and he expected to see new issues from the banking sector next year after some of the rescued banks had been recapitalized.
(Editing by Nick Tattersall and Greg Mahlich)