Nigeria will turn 60 on October 1 and it is undeniable that its citizens within the country and in the Diaspora will celebrate the nation’s independence anniversary from British colonial rule with mixed feelings.
With the combination of the COVID-19 pandemic as well as the weak macroeconomic indices besieging the country, it is no surprise that the measurement of the performance of the economy, which is the capital market, has recorded mixed fortunes.
For example, the bourse’s year-to-date performance currently stands at -1.9 per cent which is not too bad compared with other African nations’.
However, Nigeria’s current Gross Domestic Product (GDP) has been a source of worry over the past few months as statistics from the National Bureau of Statistics (NBS) revealed a 6.10 per cent year-on-year (y-o-y) decline in Q2 2020, when compared with the 1.87 per cent growth rate recorded in Q1 2020. This was due to the distortions in economic activities and the collapse in oil prices during the second quarter as a result of lockdown measures implemented both domestically and internationally owing to the COVID-19 pandemic.
Coincidentally, the establishment of the Nigerian stock market began the same year Nigeria got its independence. The founding fathers of the capital markets at that time, signed Memorandum and Articles of Association that established the then Lagos Stock Exchange (LSE) in 1960.
Those who signed the initial Memorandum and Articles of Association were Sir Odumegwu Ojukwu, Akintola Williams, C.T Bowring and John Holt Investment Company. The Exchange then began operations as a private company limited by shares. But formal trading did not commence until June 5, 1961. After existing as the LSE for about 17 years, the exchange was renamed Nigerian Stock Exchange (NSE) in December 1977 and re-incorporated as a company limited by guarantee in December 1990.
The Nigerian stock market started operations with only four stocks, which were the Nigerian Tobacco Company (now British American Tobacco), John Holt Investment Company Limited Company (ordinary stock) John Holt Investment Company (preference stock) and the Nigerian Cement Limited and for many years, the call-over system was used for trading.
But, when it comes to the battles it has faced, the nation’s stock market in 60 years, especially over the last two decades (2000-2020), has undergone serious renaissance.
For instance, the market has pivoted between the philosophical, dramatic, subdued and the innovative with a snap period of disruptive intervention in the legal structure, trading system, clearing, settlement and delivery, system, quantum of listed companies and securities, corporate governance and upward trend in deployment of Information and Communication Technology (ICT).
The interface between the market and the investor was no longer wrapped in obscure practices but became open to the light of new trading rules and new trading methods (open-outcry and trader market muscle memory were replaced with keyboards, monitors, charts, research reports, Fibonacci algorithms, candlestick presentations and corporate market engagement, ‘Facts-Behind-the-Figures’).
As at 1984, the All Share Index (ASI) stood at 100 basis points, but Friday’s closing session of 26,319.34 points and N13.755 trillion shows that the market has grown significantly over the years, although the market value had hit a peak of N15.67 trillion in the first quarter of 2008 before the global meltdown affected the market in which a lot of investors lost their investments.
It is safe to say that Nigerians are yet to maximise the potential of the stock market due to the fact that they are scared of losing their investments but Daily Sun investigations revealed the tide is gradually turning as domestic participation is gradually outfoxing foreign participation.
According to data obtained from the NSE’s website, domestic participation in August 2020 stood at 59 per cent while foreign participation stood at 41 per cent. Also, the inflow of transactions done by domestic investors stood at N29.49 billion while transactions done by foreign investors stood at N17.66 billion. It is also not a secret that the nation’s economy has been characterised by sluggish growth, while insecurity and weak economic fundamentals, among others have further worsened the precarious nature of the market. But there is hope on the horizon as many initiatives are said to be put in place to revive the market.
First, the Capital Market Master Plan (CMMP) will be one of the major focus of the Lamido Yuguda-led management of the Securities and Exchange Commission (SEC). The new SEC boss assured investors of a much easier and simpler way of making transactions as well as protection of their investments in the capital market.
He revealed that the SEC is working legally to close the loopholes in the market to protect investors from falling victims to certain operators who have capitalised on the holes to dupe investors of their money as well as helping investors to reclaim their dividends.
This is to say there would be a more effective and efficient regulatory approach with the deployment of Information and Communications Technology (ICT) by SEC and the Nigerian Stock Exchange to operationalize their services. Also, market monitoring, enforcement of rules and ease of exchange of information between the regulators and other stakeholders in the ecosystem will increasingly be upscaled.
Furthermore, unethical acts have been treated with dispatch while the arrival of Lagos Commodity and Futures Exchange (LCFE) in addition to NASD Plc and FMDQ Exchange have further diversified the market, thus, creating multiple sources of transaction for the stakeholders in the capital market ecosystem. Reviewing the performance of the market over the years, Nigerian capital market operators have identified some highs and lows of the market.
According to them, the capital market needs to be continually innovative, proactive and dynamic to attract more patronage and participation. Speaking to Daily Sun, Managing Director, APT Securities, Kurfi Garba, who observed that the capital market had come a long way in terms of development and operations, urged the market regulatory authorities to draft out regulations on restoring confidence in the market by working on reducing unclaimed dividends, regulatory paperwork on forex trading and proactiveness in dealing with challenges in the stock market.
“The regulatory authorities should work on reducing unclaimed dividends and also sensitise the local investors on participating actively in the stock market. By doing that we will give the foreign investors a huge fight, which is going to be healthy for our market,” he said.