Lagos — Foreign investors have cited seven major factors hindering their patronage of the Nigerian capital market despite the high returns the market provides.

According to a survey conducted by the National Committee on the Review of Capital Market Structure and Processes set up by the Securities and Exchange Commission (SEC) last September, international investors cited weak regulation, poor surveillance and inefficiency as some factors discouraging them from Nigeria.

The investors also said the cumbersome share issuance process, shallow nature of the market and high transactions were equally impacting negatively on efforts to attract investments to the country.

The Nigerian Stock Exchange (NSE) had been ranked by the International Finance Corporation (IFC) as the best in terms of returns compared to its emerging market peers such as JSE Securities, South Africa; Istanbul Stock Exchange (ISE), Turkey; Bombay Stock Exchange (BSE) India, Sao Paolo Stock Exchange (SPSE), Brazil and Dubai International Financial Exchange (DIFX), United Emirates.

The NSE also has been giving better returns than its global peers such as New York Stock Exchange (NYSE), United States and London Stock Exchange (LSE) in the United Kingdom.

In spite of the higher returns, international investors hardly consider the NSE as their number one investment destination. Although many foreign investors visit the NSE with only words of assurance that they would return to invest in the market, those promises are most times not fulfilled.

According to the survey made available to THISDAY, international investors were asked to rate their perception of the NSE against other global peers on a scale of worst to best.

Rating the surveillance and enforcement in the market, 62 per cent of the investors said surveillance and enforcement was less than fair, while only 38 per cent said it was better than fair.

In terms of regulatory and tax regime, 64 per cent of the investors rated the market as less than fair, while 38 per cent rated it as better than fair. A total of 75 per cent of the investors rated liquidity of the market as less than fair while 25 per cent said the liquidity was better than fair.

Similarly, 75 per cent of the investors rated the market as less than fair in terms of deals execution and costs. Also, 75 per cent of the investors viewed the market depth as less than fair, while 25 per cent rated it as better than fair.

The primary issuance process was rated very low as 88 per cent of the investors said it was less than fair, while 12 per cent viewed it as fair.

According to the survey, the Nigerian market size is significantly smaller than the selected global peers. The market is 8.5 per cent smaller than emerging peer average.

In terms of trading volumes, the Nigerian market is 19.5 times smaller than its emerging peer average, while in terms of value per listed company; Nigeria is 3.5 times smaller than emerging peer average.

The survey also revealed that Nigeria 's trading fees and commissions are higher than selected global peers and 1-3 times more expensive than emerging peer average.

However, in terms of trade settlement process period, the Nigeria market is in line with global peers. In this regard, 54 per cent of the international investors rated Nigeria as better than fair.

Also, in terms of infrastructure and technology, 59 per cent of the investors rated the NSE as better than fair, while 41 per cent rated it less than fair.

Having identified some of the challenges, the committee, SEC set up to articulate a comprehensive plan for the strategic repositioning of the Nigerian capital market has made 32 recommendations aimed at achieving that objective.