Technology and the Nigerian Capital Market in 2021

Thursday, March 17, 2022 / 05:30 AM / by Proshare Research/ Header image credit: Ecographics

Technology and capital market

The Nigerian money market has seen a slew of technological innovations as fintech companies and conventional depository banks face off in an uphill battle for the mandate of retail financial customers. The struggle to deepen the financial market and bring previously overlooked customer segments into the service delivery fold has imposed new operating standards in the short-term financial service delivery landscape. Financial service providers have become agile, fast and intuitive.

The capital market also evolves, although more slowly, like the money market. Technological innovation has been less aggressive and less competitive in the capital market as old traditions reluctantly fade away. Indeed, fintech companies are beginning to kick the tires of the capital market as the regulatory sandboxes built by the Securities and Exchange Commission (SEC) allow companies like Shakatesting the cross-border trade market. The activities of platforms such as Shakabroadened the opportunities and portfolio composition of a younger, more digitally inclined investor community.

Technology adoption

Technology adoption has been slower in the capital market than in the money market, but that is changing, especially clearing and settlement. The payment system promises to be as fast and efficient as the money market. But beyond adoption, the critical issue for the market is adaptation. Trading technologies developed outside the Nigerian capital market may require adjustments to make them adapted to the market. The quirks of the local commercial culture could dictate that technology used in other markets be reviewed to make them either suitable for the local market or abandoned for bespoke local alternatives. Adaptability will be a central market concern in 2022, as a younger generation of investors begins to assert greater influence.

Data will increasingly be at the heart of market activity as it passes through various filtrations to translate numbers into customer/investor experiences. The need to embrace technology will underpin capital market development in 2022. Successful companies will be those that embrace new cultures and understand the imperatives of financialization or turning assets into cash flow.

Market players will increasingly convert data into value-creating propositions and build a financial ecosystem significantly different from the past. The new system would reflect agility, clarity and innovation. Emblems such as financialization, innovation and migration skills and talents will become important features of the market as capital flows (FDI) overtake traditional trade in goods.

In a recent report, WiredUK noted that “Digitization has spread to all sectors, creating new opportunities. But simply having data is no longer enough – businesses must harness its power to gain competitive advantage, especially when it comes to financial transactions.“.

Figure 1: The product/service filter: from figures to markets

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Online Trading Report Summary

The Nigerian capital market in 2021 faced brutal headwinds as difficult economic conditions caused by COVID-19 lockdowns led to a global reduction in economic activity from the second quarter of 2020. Quantitative easing adopted by nations around the world, including Nigeria, has resulted in a V-shaped economy. recovery but not without consequences.

Fiscal expansion accompanied by monetary easing (a fancy way of explaining the large influx of new funds into the economy) unaccompanied by manufacturing growth has led to higher domestic inflation. In the case of Nigeria, from the end of the first quarter of 2021, the inflation rate started to decline, according to National Bureau of Statistics (NBS) The data. Bureau data showed inflation fell from 18.17% in March 2021 to 18.12% in April before slipping to 17.93% in May and 17.75% in June 2021. In July, the downward trend continued, with inflation falling to 17.38%, then to 17.01% in August before falling to 16.63% in September. The start of the last quarter of 2021 saw inflation dip to 15.99% in October before dropping a notch to 15.4% in November. In December 2021, the pauses were applied as inflation returned to 15.63%.

The reversal in the inflation rate at the end of the year was attributed to seasonal spending which is expected to be short-lived. Analysts note that the direction of inflation in the first quarter of 2022 will depend on a few factors. The first factor would be internal security. The increase in domestic banditry led farmers to avoid their farms for fear of being kidnapped or, worse, being killed. The consequence of farmers’ reluctance to plow the land and harvest the crops is a reduction in on-farm production, leading to increased food inflation. A second factor is supply chain disruptions, as global cases of the COVID-19 virus remain a concern. Global manufacturing has resumed, but has yet to reach pre-pandemic levels, meaning supplies of a few critical raw materials and production inputs remain constrained. The gradual recovery of supply chains should improve the Purchasing Managers’ Index (PMI) and support lower commodity prices over the coming months.

Restoring agricultural production and supply chains would improve the fast moving consumer goods (FMCG) sector and improve the fortunes of Nestlé, Flour Mills Nigeria, BUA Foods and other companies that depend on agricultural production and of their local grain distribution networks.

As the economy recovers, companies in the telecommunications and fintech sectors are expected to experience an increase in revenues, as growing demand drives up demand for data and digital marketing, as well as payments and services. regulations. Companies like MTN and Airtel Africa are expected to do well with increased data revenues in 2022.

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