By Chinwendu Obienyi
From just four firms including Inlaks, John Holt, CT Bowering and ICON (Investment Company of Nigeria) as market dealers, with total market volume about £250,000, largely made up of government securities in 1961, the Nigerian capital market (NCM) has metamorphosed into a global entity capable of competing with any other elsewhere in the world.
This is in terms of its legal structure, trading system, clearing, settlement and delivery system, number of listed companies and securities, corporate governance and in the deployment of Information and Communication Technology (ICT).
Looking at the performance of the market over the years, it has done fairly well considering the many challenges in the operating environment. The market has had challenges such lack of capital market friendly economic policies, ignorance on the part of many people, policy somersaults and political instability.
Despite the challenges, the NCM has significantly improved as its record of activities show that between 1996 and 2001, a total of 172 new issues (securities of public companies amounting to N56.40 billion) were floated in the market.
The new issues were valued at N5.85 billion in 1996 but this quickly rose by about 532 per cent to N37.198 billion in 2001 and improved to N61.284 billion in 2002, N180.079 billion in 2003 while the year 2004 and 2005 accounted for N195.418 billion and N552.782 billion respectively. NGX capitalisation however crossed the trillion Naira mark at N1.935 trillion in 2007 when the market was at its peak.
Similarly, the number of listed securities on the local bourse grew from 19 in 1961 to 60 in 1971, 194 in 1981, 239 in 1990 and now stands at over 300 securities in 2021.
In terms of market capitalisation, which is the most widely used indicator for assessing the size of a capital market to an economy, it was recorded at about N10 billion and N57 billion in 1988 and 1994. It is currently standing at N20.955 trillion as at September 30, 2021.
Furthermore, the market’s apex regulator, the Securities and Exchange Commission (SEC) introduced measures like enforcement of rules based on market integrity, strengthening of capital market operators (CMOs), introduction of the e-dividend platform to reduce unclaimed dividends, introduction of direct cash settlement (DCS), which allows investors to have direct access to the proceeds of their shares sold by brokers among others to ensure the NCM have more wider participation.
It is noteworthy to point out that the Nigerian Exchange Limited (NGX)-formerly known as the Nigerian Stock Exchange (NSE) is now a demutualised entity breaking into three subsidiaries, namely: Nigerian Exchange Limited (NGX Limited), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulation company; and NGX Real Estate Limited (NGX RELCO), the real estate company.
From all indications, the NGX Group appears to have since begun to actualise the benefits of its demutualisation policy, including the alignment of stakeholders’ interests in the value created by the new Group under a revised corporate governance framework. Under its new structure, the HoldCo sits at the apex of several organisations and is tasked with the implementation of strategic value-creating initiatives and services that strengthen the Group. Led by Oscar Onyema, the Group today looks well positioned to realise its vision of becoming Africa’s leading integrated capital market infrastructure group.
However, in separate interviews, stockbrokers under the aegis of the Association of Securities Dealing Houses of Nigeria (ASHON) and Chartered Institute of Stockbrokers (CIS) have insisted that the contribution of the capital market to the Gross Domestic Product (GDP) must improve.
Speaking to Daily Sun, CIS President, Olatunde Amolegbe, explained that the market, relative to the economy, was abysmally low. He pointed out that the equity market capitalization to GDP ratio stands far below 20 per cent, in contrast to South Africa’s 348.3 per cent and Brazil’s 68.4 per cent, adding that ratios in the key developed economies are in excess of 100 per cent.
“The participation of Nigerians in the capital market is very low. Less than 5 per cent of the country’s population is involved in the market as investors, while less than one per cent of registered companies are listed”, Amolegbe said.
Also speaking, ASHON’s Chairman, Chief Onyewenchukwu Ezeagu, said the challenges experienced by the NCM emanates from the buy and hold attitude of many investors and lack of synergy between the regulators and operators, resulting in low participation.
“There is a problem of poor internet data, lack of synergy between the regulator and regulated and Government policy summersault. There is a need to expand the frontier of awareness creation to strengthen investor education.
“We have overcome most of the historical challenges but a lot needs to be done in the creation of awareness of the benefits of the market to the large population of the country. There is the need for concerted efforts to reverse investor apathy due to the market downturn of 2008. We must improve on our identity management essentials to ensure that existing investors receive dividends promptly. This will reduce fraud and enhance confidence”, Ezeagu said.