Chinwendu Obienyi

The performance of equities on the floor of the Nigerian Stock Exchange (NSE), in terms of turnover, decreased by 7.42 per cent in 2019 from 10.22 per cent recorded at the close of transactions in 2018.

According to a document obtained from NSE, its total volume in terms of equities fell by 20.8 per cent from 101.42 billion units to 80.35 billion units while turnover value of equities declined to N962.65 billion from N1.19 trillion in 2018, representing a decrease of 19.70 per cent.

Speaking recently at the presentation of key performance of the Exchange in 2019 and prognosis for the market in 2020, Chief Executive Officer of the Exchange,  Oscar Onyema, said the Nigerian capital market mirrored the performance of the larger economy, which continued its moderate path of recovery, growing by 2.28 per cent in the third quarter of 2019.

“The Nigerian bourse witnessed the impact of various factors, including a weak macroeconomic landscape; fiscal and monetary policy direction; underwhelming trends in foreign portfolio investments; concerns around the stability of the naira and moderate corporate earnings. While these factors led to a negative performance in the equity market during the year, our fixed income market performed exceptionally well, reflecting a flight to safety,” Onyema explained.

According to him, the reduction in market velocity as regards equities was indicative of how the economy performed.

“We saw a sustained downward trend and in a market like Nigeria, velocity tends to drop. If you look at what has already happened this year, there has been a significant increase so I think the culture here is that velocity tends to increase when the market is going up and on our part, we need to do a better job of educating investors around the fact that even in a down market, there are opportunities to make money including from securities lending and appropriate measures because there are quite a number of individual stocks that did quite well in 2019,” he said.

The NSE boss thereafter assured the investing community that the Exchange will continue to develop new strategic partnerships with the goal of delivering better products and services to its customers and maintain momentum in executing NSE’s 2018-2021 corporate strategy in its efforts to elevate the prominence of Africa’s global financial markets. However, market operators who spoke to Daily Sun called on the Federal Government to focus more on building up good politics and economic governance.

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Chief Executive Officer, Crane Securities, Mike Eze, noted that 2019 elections as well as the focus on politics left the capital market susceptible to low transactions done in 2019.

Eze said, “the market is an index with which the economy is measured. The capital market is the heart beat of any economic system, be it advanced or emerging economy. Yes, the elections took their toll on the market but that was not the only factor; rather the basic reason was that managers of the economy were looking at the politics of governance rather than the economics of governance and so the market reacted to that. “Our economy did not do too well looking at the economic indices especially with the inflation rate being on the high side and even currency parameters were nothing to write home about.”

According to him, “the market has a self-adjusting mechanism because it is a reflection of how well or bad the economy performs. However, there is a little glimpse of hope as the market has started off on a positive footing and we hope this would be sustained.”

For his part, Managing Director, Highcap Securities, David Adnori, said the decline showed that activities in the stock market were at their lowest ebb in 2019, adding that it was caused by the tense economic polity as well as the performance of the economy.

“That figure is currently the lowest in the world, indicating that market was virtually inactive whereas in other jurisdictions, it was up to 40-50 per cent and so this showed that activities in the stock market were at their lowest ebb in 2019. This was necessitated by the build-up to the elections and the economy was not performing well.

“The economy suffered stagflation, that is a combination of recession and inflation so while the economy exited recession, inflation remained high at double-digit, so the economic crisis is still not over, it even reflected in the growth indices which recorded paltry 2 per cent and this influenced the decision of investors who moved to the fixed income segment,” he explained.

On the way forward, Adnori, said: “There has to be good politics as it gives rise to a good economy which, in turn, results in a vibrant capital market. Economic policies have to be correct and precise because as it is now, it will be difficult to be very vibrant because the yield on fixed income is much higher than the equities. Thus, the managers of the economy have to build up the politics of the country so that they can get the governance of the economy right.”