￼Uncertainty still rules stock market
Sell pressure dominated trading activities during the first two years of the present administration, leading to a loss of about N1.611 trillion.
The peaceful presidential elections that saw Muhammadu Buhari emerging as a winner in 2015 had ignited excitement in the capital market community and the nation at large.
The nation’s capital market, which is the barometer that gauges the performance of the economy, responded positively immediately after elections surging 20 per cent between March 20 and April 13 following the euphoria and excitement that greeted the successful general elections.
Hopes by some market analysts that the peaceful general elections and subsequent smooth hand over in May, 29, 2015 to the new government would drive investors’ confidence was dashed given the bearish trends that had characterised the local bourse since the change of baton a two years ago.
As the nation celebrates, two years of smooth hand over to the new administration in May 29, safe for the unprecedented rally witnessed recently, the stock market community has continued to count their losses.
There have not been major activities on the part of the government and regulators since the emergence of the new administration aside from the conclusion of recapitalization of Capital Market Operators (CMOs), direct cash settlement, e-Dividend awareness and the recent listing of Eurobond and savings bond in the stock market.
Available statistics to New Telegraph showed that, transactions on the Nigerian Stock Exchange during the review period according to experts, continued to skew downward as the market, which opened the hand over year high at N11.658 trillion in market capitalisation and 34,310.37 in index at the beginning of trading on 1st June 2015, closed last Tuesday 26th of May, 2017 at N10.047 trillion and 29,064.52 index points.
This translates to earnings of a year-to-date loss of about N1.611 trillion or 15.30 per cent year to date.
The index measures the performance of the stock market and also reflects how prices of stocks have moved, which in turn determines how much investors made as gains or losses.
Investors had been particularly wary of the outlook for Nigeria, Africa’s largest economy and the world’s number four oil producer due to the fact that the global benchmark oil prices have fallen more than 50 per cent, taking Nigeria’s currency with them and leaving a gaping hole in government revenues.
According to market analysts, the factors, which impacted on the market during the period under review were drop in the crude oil price, delay in passage of budgets, lack of clear policy direction, depressed consumer purchasing power, expected weak corporate earnings, the flight to safety by foreign investors on account of the weak Naira and volatility in forex as the nation slipped into recession.
Disqualification of 24 CMOs
Following the recapitalisation of Capital Market Operators (CMOs) that was concluded on September 30, 2015, activities on stock market began the year on 4th January 2016 with regulatory hammer falling on some operators for non-compliance.
The Securities and Exchange Commission (SEC) disqualified 24 CMOs for non-compliance or inability to substantiate claims of compliance by the audit firms.
The lists uploaded on SEC’s website after capital verification had been conducted showed that 429 CMOs adhered to the minimum requirements while 24 others were disqualified.
Direct cash settlement/e
The Capital Market Committee (CMC), the umbrella body of all capital market stakeholders under the leadership of the Securities and Exchange Commission (SEC) had resolved that the direct cash payment be made compulsory for all investors in the capital market effective by September 1st 2017.
The Director General of Securities and Exchange Commission (SEC) stated this recently at the first quarterly CMC press briefing for the year 2017.
He said though the system was made voluntary previously but the committee has agreed to make it mandatory for every market operators in a bid to prevent illegal sale of investors’ stocks and make settlement to be prompt.
Direct cash settlement is a process where cash proceeds from trades executed by brokers on the Exchange settles directly into investors’ bank account.
It starts when a client gives his broker the mandate to sell his or her shares.
Aside tackling the issue of direct cash settlement to woo retail investors back to the market, Gwarzo explained that the commission has made progress on e-dividend payment system as the platform has so far raked in about 2.2 million registered investors.
He said the system has drastically reduced the growth of unclaimed dividend.
“At the beginning, the compliance was low but with the committed efforts of market stakeholders in collaboration with the Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement System (NIBSS), we have been able to get 2.2 million Nigerians that have mandated their accounts and our intention is to have about 7 million Nigerians and that’s have not relented on our awareness campaign,” the DG added.
He said there is no going back on June 30th deadline for all investors to comply to the e-dividend platform.
History was made recently when the $1 billion Federal Government of Nigeria Eurobond was listed on the Nigerian Stock Exchange (NSE) and FMDQ. The 15-year Sovereign Eurobond issued at a coupon of 7.875 per cent per annum, was the first foreign currency denominated security to be listed and traded in the Nigerian capital market.
Commenting on the listing, Director General, Debt Management Office (DMO), Dr Abraham Nwankwo, said that the listing of domestic Sovereign Eurobond reinforces FGN’s commitment to deepen and grow the Nigerian capital market. Developing the domestic market can help bridge the infrastructure deficit constraining economic growth.
Also, in order to boost to boost financial inclusion, the Federal Government took a step further by introducing savings bond to encourage retail investors.
The first issue of the sovereign savings bond, which will be a monthly issuance, opened on Monday, March 13, 2017 and closed on Friday, March 17, 2017. At the first issue, a total of N2.068 billion was allotted via 2,575 successful subscriptions.
The minimum subscription amount was N5, 000.00 with additions in multiples of N1, 000.00, subject to a maximum of N50, 000,000.00.
Backed by the full faith and credit of the Federal Government of Nigeria, the bond, amongst several objectives was purposed to deepen the national savings culture, provide opportunity to all citizens irrespective of income level to contribute to National Development, enable all citizens participate in and benefit from the favorable returns available in the capital market and more importantly diversify funding sources for the Government.
The debut of the savings bond had put Nigeria in the league of sovereigns like Sweden, Thailand, Slovenia, Indonesia, United States, and United Kingdom with savings bonds.
Operators’ assessment Reviewing the state of the market since the emergence of new administration, some operators blamed the downturn on the state of political, economic and financial situations in the country.
Managing Director/CEO of Highcap Securities Limited, Mr. David Adonri said: “The decline of the Nigerian stock market is due to several factors. First is the increase of political risks due to infighting within the ruling party at federal level. Next is the declining price of crude oil.
Others are resurgence of Boko Haram, protracted energy crisis and macroeconomic liquidity squeeze. He said that absence of clear policy direction by the present administration contributed in no small measure in depressing equities prices.
He affirmed that the crumbling share prices in global markets would not have had much impact on the local bourse if “we have clear policy direction and if our economy us self-regenerative.”
President, Constance Shareholders Association of Nigeria, Alhaji Shehu Mallam Mikail, said : “in terms of economy there is nothing to write home about, everything has skyrocketed.
The president travels around the world and he has not attracted considerable investment.
“The policies, which have been put in place by regulators are the only thing that has kept the market going.
There has been no better approach from this government to fine tune the stock market to attract more companies to list because no clear blue print for the economy.
The Nigerian stock market is in need of a clear cut policy direction and stability.
A lot of foreign investors, which constitute about 70 per cent of market players appear to have taken to their heels leaving only the bandwagon local investors, who also have no clue of the impact of future monetary policy on their investment position in the scene