Shareholders of banks quoted on the main board of the nation’s stock market recorded a loss of about N305 billion between July and November 18, 2016, investigations by New Telegraph have revealed.
Africa’s largest economy faces its worst crisis in 25 years, brought on by low oil prices, which have slashed government revenue, hammered its currency and caused chronic dollar shortages frustrating businesses.
The banking sector recorded the loss despite expectations that adoption of a more flexible exchange rate policy by the Monetary Policy Committee (MPC) would help give a lift to the stocks.
Checks by this newspaper showed that the banking subsector recorded a loss of N305 billion or 19.15 per cent to close at N1.287 trillion in market capitalisation on November 18, 2016, as against closing figure of N1.592 trillion at the beginning of third quarter trading in July.
With oil prices are still low despite slight recoveries, Nigeria’s economy continues to go through turbulent times, as creeping inflation, forex uncertainty, rising unemployment and bleak economic prospects persist.
The banking industry is one sector that has fallen victim to the persistent macro-economic headwinds that have weakened consumer purchasing powers and eroded earnings of companies including banks. Nigerian banks are grappling with reduced credit growth due to lower loan demand, higher impairments from oil & gas exposures and increasing regulatory capital requirements.
Investors who were making inroad back to the equities market following intervention by the government to give the economy clear direction especially to bring lasting solution to the crashing naira have made a retreat, as the intervention seemed not to have saved the local currency.
Other militating factors such as drop in the crude oil price, depressed consumer purchasing power and expected weak corporate earnings have also further kept investors at bay from the local bourse.
As a result of the weak macroeconomic environment, investors seem not to be willing to stake their funds on equities listed at the Nigerian Stock Exchange (NSE).
This has led to current free-fall of prices of stocks. Financial analysts, which had predicted lower profits for quoted companies attributed the development to lower national imports due to foreign exchange challenges, lull in economic activities and slow implementation of the 2016 budget, among others.
The Managing Director, Cowry Assets Management Limited, Mr. Johnson Chukwu, said banks made higher provisions for bad loans in their second quarter results due to the lull in economy, slow implementation of the budget and reduction in their income lines and profits.
Chukwu noted that banks’ income lines have reduced due to the foreign exchange challenges in the country, adding that many banks cannot engage in trade finance as they should have done due to scarcity of forex.
According to him, lending that should go to the Federal Government contractors could not happen due to the late pas sage and implementation of the budget.
“And more importantly, they will experience higher provisions for bad loans due to the lull in economic activities,” he said. However, the Federal Government of Nigeria has said that it is considering incentives regime that will enable businesses to thrive and encourage companies to quote on the Nigerian Stock Exchange.
The Vice President, Prof. Yemi Osibanjo, who stated this recently during an interactive session with capital market stakeholders and closing gong ceremony at the NSE’s corporate headquarters said the immediate challenges facing the country were power, exchange rate and infrastructure, adding that “all of these are things we are working on day by day basis to resolve” Osibanjo noted that his interaction with the council has helped in a great deal in understanding some of the issues and that government is looking at the way it could deal with it. “This is a partnership between government and the private sector, government being a mere regulator and enabler.
The major thing is that there is engagement already on listing several major companies which have already indicated interests in listing. And I think for privatised companies, the decision is not in the hands of government because they are already privatised, listing should be the decision of the new owners.
So, really it’s not government that will decide on the listing of the privatised companies, but we are fully ready to encourage listing on the Stock Exchange.
“The Stock Exchange is an important driver of the economic activities, an important driver of investment, for the Federal Government that is an absolute necessity, I don’t think we need to wonder whether government want to encourage listing.
We certainly want to encourage listing, and that’s part of why I am here, to promote interest in the market,” he said.