With no fewer than six days of trading before the year ends, it is almost certain that transactions on the Nigerian Stock Exchange (NSE) will close in the red zone.
The outgoing year is, indeed, turning out to be yet another locust year for both local and foreign investors, due to an unfriendly operating environment.
This, analysts said, was in spite of the impressive financial results churned out by most quoted companies.
According to the analysts, the market was negatively impacted by the general elections, insecurity and unstable monetary and fiscal policies, among others, even in the face of stability in foreign exchange market.
Records of trading on the NSE as of December 20, 2019 showed that the equity market dipped by 15.60 percent year-to-date due to massive sell-offs, yet it recorded strong corporate fundamentals of listed companies against a loss of 17.81 percent in 2018.
At the close of transactions on December 22, the All-Share Index of the Exchange during the review period dropped by15.60 percent year-to-date to close at 26,526.35 against the opening year index of 31,430.50.
However, the market capitalization which opened for the year at N11.720 trillion in spite of two major listing gained N1.08 trillion to close trading on Dec 22 at N12.804 trillion.
Market watchers are of the opinion that the loss could have been higher if not for the increased number of listing witnessed during the year.
Analysts believe that despite the decline, 2019 would remain evergreen in the history of the Exchange with the array of new listings like SAHCOL, MTN Nigeria Communications and Airtel Africa.
SAHCOL Plc, which is a competitor to NAHCO Plc, listed 1,353,580,000 ordinary shares at N4.65 per share by way of an Initial Public Offering (IPO) on the main board of the NSE on April 23, 2019.
Specifically, MTN Nigeria on May 16 listed, by introduction, a total of 20.35 billion ordinary shares at N90 per share, lifting the market capitalization then by N1.83 trillion.
Mr Oscar Onyema, NSE Chief Executive Officer, said MTN Nigeria’s listing on the nation’s bourse was a testament of its commitment to building a dynamic and inclusive market, and creating channels for sustainable investment.
Also, Airtel Africa in July listed 3.76 ordinary shares on the main board of the NSE at N363 per share.
Commenting on the performance of the stock market in 2019, Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd, said the major achievement of the market was its ability to attract the listing of MTN and Airtel Africa.
Kurfi, who commended the Exchange for the listing, said it was an option to either list on the NSE or the JSE but Nigeria succeeded in bringing them to list on NSE:
“The listing of the two stocks gives the market capitalization of over N3 trillion, which is over 26 percent.”
He said another high point of the year was the success of getting the Demutualization Bill to be signed into law by the President, noting that its implementation would likely commence by the first quarter of 2020.
Kurfi added that achieving one trillion capitalization for mutual funds was another great feat for the year 2019.
He noted that the performance of the stock market would close in negative zone at the end of the year with the cumulative loss of 30 percent or more for 2018 and 2019.
However, Kurfi expressed optimism that 2020 would be a good year for the stock market as witnessed in 2017 when the market gained more than 42 percent after dropping in 2015 and 2016.
He listed the factors expected to drive the market in 2020 to include early signing of the budget, payment of new minimum wage and increment in the Loan Deposit Ratio (LDR).
Kurfi noted that the early signing of the budget would likely increase the Capital Expenditure (CAPEX) performance for the year 2020 with multiplier effects on the economy:
“The salary increase will improve the purchasing power of the workers who may increase their savings and Investments.
“The Loan Deposit Ratio (LDR) will increase credit to private companies who will likely increase their production and profit declaration.
“The restrictions of participants into OMO and TBs will push investors into equities. The low price of the stocks mostly trading below their fair value is an attraction to the capital markets.”
To Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., the stock market would end the year in red but increased number of listed companies, primary market activities and some mergers were remarkable achievements that impacted positively on market capitalization.
Omordion also lauded the market regulators for the listing of MTNN Airtel Africa and SAHCOL that strengthened the market capitalization, noting that the new listing helped in minimizing the loss.
He said the current move by the monetary policy to push funds to the private sector the CBN LDR of 65 per cent would stimulate economic productivity and growth.
According to him, the fiscal authorities need to double their efforts through economic reforms that will complement the CBN policies to support this recovery move.
He added that the signing of the first phases of the trade agreement, lower rates in advanced economies and markets by USA and China would likely redirect funds to emerging and frontier markets in 2020.
Mr Moses Igbrude, the Publicity Secretary, the Independent Shareholders Association of Nigeria (ISAN), said the performance of the stock market in 2019 was neither here nor there as some companies paid good dividends, especially banks.
Igbrude said policy instability, insecurity, port congestion, multiple taxation and infrastructural deficiency affected the market during the period under review with some companies delisting from the NSE.
At the last count, he said seven companies namely Skye Bank, Fortis Microfinance Bank, First Aluminium, Newrest, Diamond Bank, Dangote Flour and Great Nigeria Insurance delisted in 2019.
Some of the companies delisted as a result of environmental factors and government policies.
“I am appealing to the Federal Government to take the capital market seriously because it is the barometer to measure the economy of any nation by providing the necessary support through good policies,” Igbrude said.
He tasked government to pursue policies that would enhance infrastructure development, improve power stability, eliminate ports congestion by opening up other ports in other parts of country.
Another shareholder activist, Malam Shehu Mikail, President, National President Constance Shareholders’ Association of Nigeria, said the stock market in Nigeria had not been able to achieve its potential due to the inability of most of the operators to adhere to true transparency and accountability.
For him, the much-needed compliance was now getting better due to the regulatory measures instituted by the Securities and Exchange Commission.
He challenged government to create the needed policies and an enabling environment to attract more listing and investment to the nation’s bourse:
“Nigeria capital market is a bedrock to enhance the potential of our economy if only our government could create well and essential policies that would attract investors to the market.”
Amaka E. Nliam