Uche Usim, Abuja
The Nigerian capital market has had its fair share of headwind and tailwind in recent years and as it prepares for a new decade of operations, industry watchers say there is an urgent need for a bouquet of instruments and policy crystallization to drive growth and boost Investors confidence.
A clinical analysis of the Nigerian capital market’s performance in 2019 shows shocks and calmness for both operators and investors alike.
Interestingly, the Nigerian investment space in recent times, reflects a sector that has continued to respond proactively to emerging global trends following innovative strategies being adopted by the Security and Exchange Commission (SEC) and other bodies saddled with the responsibility of guiding the investment market towards desirable direction for sustainable growth.
Looking at the performance of the SEC in the past year on critical rating parameters showed that the management has done reasonably well in terms of sustaining investors’ confidence in the capital market; instilling discipline in transactional processes in the bourse; and enlightenment and engagement of investors and their associations on emerging trends in global investment space.
Similarly, the SEC over the past year intensified sundry initiatives to protect of the public from fraudulent or scam investment promoters, improve the contributions of the capital market to nation’s economy; investment in human capital training and development; promotion of innovative technology and solutions in the SEC and capital market operations; and sustained the implementation of the 10-Year Capital Market Master Plan (CMMP) with remarkable achievements recorded so far, amongst others.
While the market saw new listing from multinational companies such as MTN Nigeria Communications, SAHCOL and Airtel Africa, investors in the capital market incurred some of losses during the period.
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 on the main board of the Nigerian Stock Exchange 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 capitalisation then by N1.83trn.
Despite these listings, market value of quoted equities closed 2019 at N12.95trn as against its opening value of N11.72trn for the year
Experts are of the view that the market as a barometer of the national economy reflected the uncertainties that characterised the 2019 business year.
They said that political risks, security risk and macroeconomic uncertainties were major factors that adversely impacted the capital market in 2019. The intense political activities in the run-off and aftermath of the 2019 general elections further fuelled macroeconomic concerns as investors waited on the sideline for clear macroeconomic direction.
Speaking on the capital market performance for 2019, the acting Director General of SEC, Ms Mary Uduk, said despite the decline in market indices, the year was a good one for the commission.
She said that SEC had made a lot of efforts towards implementation of the capital market masterplan.
Specifically, the SEC boss said the issue of unclaimed dividends had been put to rest, while new rules around derivatives market, which would deepen the capital market and make more securities products available for trading on the market, had been developed.
She said: “2019 has been a good year for the SEC, a lot of people like to refer to the negative returns in the equities market but we think that does not define the year.
“We have made a lot of efforts towards resolving the unclaimed dividends problems, we have finally come out with the rules around derivatives market which we believe will deepen our market and make more securities products available for trading on our market.
“We have also brought out a few more rules on Central Counter Party and also supporting the derivatives market and then rules around Collective Investment Scheme (CIS) so that we make them better to attract more investors.”
On outlook for the current fiscal period, Uduk said the future for the Nigerian Capital Market (NCM) is related to the outlook on the general economy.
Various estimates of economic growth indicate the Nigerian economy should grow by about 2.9 per cent to 3.7 per cent in 2019.
But the Uduk said the commission expects positive growth in 2020 as the economy improves.
She also said quick passage of the 2020 budget is expected to sustain growth and affect the capital market positively.
Uduk stated that developing an efficient derivatives trading market is one of the top priorities of the Commission in 2020.
Derivatives are securities that derive their value from an underlying security or asset.
She said derivatives as investable products are capable of boosting liquidity in the Nigerian capital market.
According to her, “Derivatives are traded in all the big markets around the world and they are used in risk management. They are also used to hedge the trade in other securities.
“We believe that in addition to that, this is a good time to have derivatives in our market. They are currently being traded in our markets but they are traded over the counter. Now we want to introduce exchange traded derivatives so that people can now hedge their positions in the market. The number one advantage apart from the risk management one is that it gives traders and investors more instruments to invest in.”
She added that other aspects of the 10-year capital market masterplan would also be vigorously implemented this year.
Uduk said: “The capital market masterplan (2015-2025) guides the policy decisions of the Commission and we expect to further consolidate on the gains of implementing some of our initiatives.
“Specifically, we expect to ensure the market operates more effectively and rules and regulations are prompt in protecting investors.”
The Chief Executive Officer of Sofunix Investment and Communications, Mr Sola Oni said the outlook for 2020 in the capital market remains positive due to series of initiatives that would be implemented to improve investors confidence.