7th January, 2016
The performance of the NSE ended poorly in 2015 as indicated by the market indicators – the market capitalisation and the All-Shares Index.
The NSE closed for the year as one of the worst markets in Africa in spite of the successful conduct of the 2015 general elections.
During the year, the Nigerian bourse slumped below its three-year low due to what market analysts attributed to dwindling crude oil price, foreign exchange problems and exodus of foreign portfolio investors.
The market was also negatively affected by the instability of the naira exchange rate which discouraged foreign investors from the bourse.
The market was unstable with the naira hovering around N197 and N200 to the dollar at the official market for the better part of the year in spite of the various measures adopted by the Central Bank of Nigeria.
Available statistics showed that a total of 92.90 billion shares worth N952.49 billion were exchanged by investors in 941,602 deals between January and December 2015.
This was against 108.47 billion shares valued at N1.34 trillion traded in 1,335,572 deals in the same period in 2014.
Data from the NSE as at Dec. 31, 2015 showed that the equity market dipped by 17.36 per cent year-to-date compared with a decline of 16.14 per cent posted in 2014.
The All-Shares Index lost 6014.90 points or 17.36 per cent to close for the year at 28,642.25 on Dec. 31, 2015 from the 34,657.15 it opened for the year.
The market capitalisation, which opened for the year at N11.478 trillion, lost N1.628 trillion to close at N9.850 trillion on Dec 31, 2015 due to huge price losses by some blue chips.
As part of moves to stem the drift in the market and restore public confidence, the Securities and Exchange Commission (SEC) introduced some reforms in the market.
They included the Capital Market Master plan, the National Investor Protection Fund and the Direct Market Access, among others.
SEC also implemented the electronic dividend payment, de-materialisation of share certificates and direct settlement payment, all geared at boosting investor
confidence in the market.
Mr Mounir Gwarzo, the Director-General of the Securities and Exchange Commission (SEC), in a recent review of the market, expressed dissatisfaction with the market performance.
“I’m not too happy the way the market is today, but it’s a market that goes up and down. It’s not a market that is continuously growing.
“If you invest one million naira in the market, it’s not sacrosanct that it will now turn back to be N1.5 million or N1.2 million. It’s a market that can go up and go down,” Gwarzo said.
He said that in spite of the perceived downturn, the Nigerian capital market situation remained a true reflection of nation’s general economic situation.
Gwarzo also said apart from domestic investors’ sentiments, the current development reflected the global trend.
According to him, the commission is also engaging government in terms of some fiscal incentives that can be provided to boost activities in the market.
The commission, he said, was studying various options of incentives that would not only stabilise the market, but
encourage domestic investors to return to the market.
Gwarzo, however, expressed optimism that the market would experience a turnaround in 2016 due to the various reforms and initiatives.
Mr Oscar Onyema, NSE Chief Executive Officer, urged investors to toe the option of maintaining diversified portfolio across different asset classes to mitigate investment risks.
He said that the market would, in the short-term, experience huge volatility, but that should not distract investors from investing because of some listed companies with well regulated market structure.
“It is important to note that we are not the only exchange affected by these global developments of all the 24 exchanges in Africa, 20 are experiencing a downturn.
“Opportunities still exist for investors in stocks, in spite of the current downturn in the capital market,” Onyema said.
Mr Oluwole Awe, the Managing Director of Investment One Stockbroking International Ltd., attributed the current lull in the market to insurgency in the North East, the general elections, fall in global oil price and
declining naira exchange rate.
Awe said that poor economic performance in Europe and Asia, weak corporate governance and weak naira contributed to the market situation.
He called on market regulators, government and operators to ensure transparency, good corporate governance and strong investor protection to enhance confidence in the economy.
Mallam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd., said that the inability of Federal Government to give clear policy direction
in the last six months of 2015 contributed to the market downturn.
Kurfi called for the total overhaul of the legal
framework on privatisation to compel some companies to be listed on the NSE.
He advised that government should, as a matter of priority, introduce tax incentives for quoted companies on the NSE.
Kurfi also advised that the three tiers of government should take advantage of the market to source for long-term funds for their projects.
The Nigerian capital market no doubt is not where it should be considering its potential.
The ratio of the market capitalisation of listed stocks on the NSE to the country’s Gross Domestic Product (GDP) at 17 per cent is still very low when compared with more developed markets.
The 17 per cent contributions to GDP is a major challenge to the regulators in mapping out strategies to increase local investors’ participation in the market.
The consensus is that foreign investors should no longer dominate the market.
The capital market must grow organically through active participation of local investors