The Nigerian Stock Exchange (NGX) Exchange Traded Fund (ETF) has suffered as a result of dwindling foreign investor participation, which has led to a decline in foreign portfolio investment over the past few years. The market fell from N24.5 billion in market capitalization in 2020 to its current N8.87 billion.
An exchange-traded fund (ETF) is a marketable security that tracks an index, a commodity, a bond, or a portfolio of assets, similar to an index fund. An ETF trades on a stock exchange like a regular share, unlike mutual funds. ETFs’ prices fluctuate throughout the day due to exchange activity.
Retail and institutional investors alike benefit from the availability of ETFs in the market since they provide a simple, affordable way to obtain diversified exposure.
Although the NGX leads the West African ETFs industry with a market cap of N8.87 billion, the market is still in its infancy when compared to the South African ETF market, which has a size of $7.11 billion.
Temi Popoola, the chief executive officer of the NGX, promised that the market would see renewal. Popoola is of the opinion that if investors could conduct analysis to determine where these possibilities exist, there are opportunities in every market segment and across all asset classes.
He emphasized the need of portfolio diversification and rebalancing for investors, pointing out that doing so will significantly lessen the systematic risks associated with each asset class.
He asserts that the main goal of portfolio diversification is to reduce investment risk, particularly unsystematic risk. Dayo Obisan, executive commissioner of operations for the Securities and Exchanges Commission (SEC), also gave a speech at the occasion and expressed trust in the ability of professionals to provide answers to problems that serve as barriers to investing in the capital market.