By Omodele Adigun and Anuforo Chineye
“TOTAL transactions at the nation’s bourse decreased by 17.87 per cent from N117.27 billion recorded in February to N96.31 in March (2016). In comparison to the same period in 2015, total transactions decreased by 47.66 per cent from the N184.02 recorded in March 2015.”
This report by the Nigerian Stock Exchange (NSE) is the smmary of the performance of the capital market during the first year of President Muhammadu Buhari administration.
According to the CEO of the Exchange, Mr Oscar Onyema, the flagship index, the All Share Index (NSE ASI), declined by 17.4 per cent in 2015 and closed the year at 28,642 points. “This was due to a combination of factors including political risk, currency volatility, and uncertainty in global crude oil prices”, he added.
Looking at the sectoral indices,all the market indices performed poorly, particularly when compared with their 2014 performance, except NSE Industrial Index which recorded a marginal increase of 1.3 per cent.
The Banking Index was the worst hit as it plunged by 23.6 per cent, followed closely by the NSE 30 Index and NSE Main Board Index, which went down by 17.6 per cent apiece.
The market for new equity listings was flat too, with only four new equity listings, one on the Main Board, and three ETFs. In contrast, five companies were delisted in 2015, bringing the number of listed companies and number of listed equities to 184 and 190, respectively.
The total volume of equities traded declined through 2015 by 28.8 per cent to N952.8 billion ($4.8 billion), and a foreign and local participation rate of 54.24 per cent and 45.76 per cent, respectively, in total value traded. Average daily turnover was also down by 28.5 per cent.
The report on Domestic & Foreign Portfolio Participation in Equity Trading, just released by the Exchange, equally reflects the downgrade of the nation’s sovereign ratings by international rating agency as ‘monthly foreign outflows outpaced inflows , although the outflows decreased by 40.20 per cent from N31.84 billion in February to N19.04 billion, while foreign inflows increased by 40.77 per cent from N10.94 billion in February to N15.40 billion in March.
Recall, that Standard & Poor’s (S&P) during the year revised Nigeria sovereign credit outlook down to negative from stable, B+. S&P noted that the decline in oil prices has hurt Nigeria’s economy, adding that “Nigeria’s monetary policy has also weakened the country’s credit profile”.
Also JPMorgan Chase & Co. as well as Barclays Plc dropped Nigeria’s bonds from their local-currency emerging market indices. Specialist African funds including Alquity Investment Management and Duet Asset Management also lowered their exposure to the capital market as a result of unclear policy direction.
It took several pleas before Index provider, Morgan Stanley Capital International (MSCI), agreed to keep Nigeria in its benchmark frontier-market index after threatening to exclude the country because of the government’s capital controls.
‘MSCI won’t implement changes for Nigerian securities in its benchmarks, including the MSCI Frontier Markets 100 Index, in its semi-annual review next month,’ the New York-based index provider said in a statement. It, however, added that the country, would be placed under a ‘special treatment, and some individual stocks that no longer meet MSCI’s criteria may be deleted from the indexes.’ The MSCI is a market-capitalisation-weighted index designed to provide a broad measure of stock performance throughout the world, with the exception of US-based companies.
MSCI threatened last month to remove Nigeria from its benchmarks because inadequate liquidity in the foreign-exchange market is making it difficult for foreign investors to buy and sell securities. But Mounir Gwarzo, the Director General of the Securities and Exchange Commission (SEC), said both the Commission and the Nigerian Stock Exchange(NSE) engaged the index provider on how to clarify whatever issues it had against the Nigerian capital market.
The SEC boss lamented that the downgrading of Nigeria’s sovereign credit rating by Standard & Poor’s have negative impact on investors’ confidence in the country.
His words: “Both we and NSE are talking to them (MSCI). NSE has been talking to them for quite some days. We have also tried to speak with them .We have set up a small group of people who also engage them, telling them the implications, not only to NSE; not only to the capital market, but to SEC. “We also need to tell them that if they do that (exclude Nigeria), the implication will have multiplying effects. Apart from the economy, it will also affect the status of SEC as board member of IOSCO (International Organisation of Securities Commissions), as the Chairman of AMERC (Africa Middle East Regional Committee) and as a member of executive management of IOSCO because of the repercussions. So we are not taking it lightly. We also think, with the engagements from the regulators, we will be able to clarify whatever issues they might have.
“Certainly the Standard & Poor’s (S&P) downgrade can pose some negative implications in terms of investors’ confidence. The state of the market is not only unique to Nigeria, it is unique to everywhere. Yes, it might reduce confidence of investors. But investors almost everywhere in the world know what is happening”.
Commenting on the impacts of Buhari’s administration on the market in the last one year, Pabina Yinkere, an analyst with Vetiva Capital Management Ltd., said: “The government has not come up with a definitive policy for the economy. The continued lack of clarity is affecting the stock market, she said.
“While Buhari, has prioritized stamping out corruption, investors have been irked by his support for the central bank’s currency-trading restrictions that are choking businesses of the dollars they need to pay foreign suppliers. More than two stocks declined for every one that rose. The overall index has plunged more than 21 per cent in the last one year, the most in sub-Saharan Africa after the Zimbabwe Industrial Index”.