2016: Capital market gasps for breath from unrealized expectations
The hope and expectations that ushered in 2016 trading activities on the Nigerian Stock Exchange (NSE) as trading commenced on the first trading day of the year, which was buoyed by the Chief Executives, Mr. Oscar Onyema’s address on 14th January, by now have become unreal.
Pointer to the unrealizable dreams that ushered in trading on the floor of the NSE in 2016 is woven around the following indices. In 2015, Nigerian economy grew at 4 per cent, while in the third quarter of 2016, the economy recorded further decline by 2.24 percent, a trend which is expected to aggravate by the end of the fourth quarter.
Also, Inflation was at 9.5 percent at the end of 2015, having increased from 7.9 percent recorded at the start of last year, but by the end of October 2016, the Nigeria’s consumer price index which measures inflation rate has risen to 18.3 per cent from 17.9 per cent recorded in September 2016.
The 2016 financial year was driven by the NSE focus on establishing a credible platform for economy financing and engagement with the federal the economy and intensifying engagement efforts with the federal government.
During the year, the NSE prioritized three strategic objectives, Increasing the number of new listings across five, Increasing order flow in the five asset classes and operating a fair and orderly market based on just and equitable principles.
The Chief Executive Officer of Nigerian Stock Exchange, Oscar Onyema had earlier in the year said that effective communication of government policy increased tax revenue and improvement in security will attract more portfolio investors to Nigeria in 2016.
Director-General, Securities and Exchange Commission (SEC), Mounir Gwarzo, at a workshop on capital market organized by the National Assembly on the Investment and Securities Act (ISA), said that the commission is putting all energy, resources and time into implementing the Capital Market Master Plan for the development of the capital market and the economy.
He stressed the challenge of the ISA at fully implementing the master plan and urged for support from the government and the legislature to ensure an amendment to the ISA.
“I hope that we would use this opportunity of direct interface with our esteemed Legislators and openly explore all solutions to the legal challenges facing us in the market on this platform”
Aside from the ISA challenge, the market is currently confronted with Challenge of Ponzi scheme, demutualization of the NSE, sustained market depression and the need for a bail out of the market.
Also, the E-dividend mandate systems services, market bailout, direct cash settlement system, among other provisions are expected to derive legal backing, and enshrined in the ISA, as some investors could exploit this to institute a legal action.
The market is currently ensuring that dealing members formalize registration with trade groups and the SEC, expected to further breach the market confidence gap, while privatization of government companies to boost activity and market offering.
Above all, the problem posed by the Treasury Single Account (TSA) continued to weaken the performance of companies, while the market on the overall performance recorded giant strides compared with 2015.
There were 20 new listings consisting of corporate and sovereign/municipal bonds, memorandum listings, mergers& introductions, Exchange Traded Funds and placing.
As at opening of trade on December 23rd, 2016, the market recorded 21 de-listings consisting of regulatory, merger schemes in terms of listed companies and maturity or redemption in terms of bonds.
Meanwhile, irrespective of the prevailing weak indices which informed the market direction in 2016, the year’s trends were better compared to trends in 2015, taking into consideration that most equities bottomed out in 2015, while very few attained new low in 2016, reflecting shallow declines in equity prices compared to 2015 data.
For instance, in 2015, all the NSE market indices performed poorly, relative to their 2014 performance, except for NSE Industrial Index which saw an uptick of 1.3 percent, but 2016 performance indices barely 24 hours to end trading for the year, showed improved performance.
Trading opens on the NSE trading floor today with the ASI -7.53 decline, the ASI in 2015 declined by 17.36 percent, reflecting a positive performance for the year.
Also, the NSE-Main Board Index opens trading today at – 12.01 per cent, while it closed the 2015 financial year at -17.60 per cent, Indicating better performance in 2016. The NSE 30 Index opens trading today at -8.82, while it closed 2015 financial year at -17.63 percent, with the possibility of more recovery in 24 hours before trade closes for the year.
The NSE Banking Index was the worst hit plunging 23.6 percent in 2015, grew to -0.59 per cent returns today, the NSE Consumer Goods Index opens today at -7.89 percent returns, while it closed the 2015 financial year at -17.41 per cent.
NSE Insurance Index opens trade this morning at -13.79, while it closed the 2015 financial year at -4.70 per cent
The NSE Oil/Gas Index-11.00, while it closed the 2015 financial year at -6.20 per cent. The NSE Lotus 11 index opened the last trading week of the year at -8.06, while it closed 2015 financial year at -10.92 per cent. The NSE Alternative Securities Market
(ASeM) Index opened the last week of 2016 trading at 0.81 returns on investment, while it closed 2015 year at -0.39 per cent.
NSE Industrial Goods Index-26.26, though it performed better in 2015 at 1.27 per cent growth. The NSE Pension Index last week of trading in 2015 at -1.93 returns on investments, while it closes 2015 financial year at -17.02 per cent.
However, NSE Premium Index recorded 6.75 per cent growth which opened trade December 28th, 2016, against -13.89 per cent which closed trading in 2015.
The overall performance of the market in 2016 relating to growth in market value, all share index which and decline in transaction level reflect that irrespective of the operating challenges, the Nigerian market performance challenged the worsening economic scenario.
Irrespective of the market downturn, Onyema assured that the market still provided the bouquet of opportunities to guarantee earnings and help investors achieve their investment objectives.
“The current state of the market creates both challenges and opportunities for investors. We believe that taking a portfolio approach to investing provides the best risk-adjusted alternative for participating in the capital market. As such, we want to ensure that the NSE provides a repertoire of products that will allow investors to create well-diversified portfolios of uncorrelated asset classes,” Onyema assured.
Founder, Independent Shareholders Association of Nigeria, Sir Sunny Nwosu, who spoke on the state of the Nigerian market called on the federal government to come to the aid of the market through sound economic policies and positive market friendly pronouncement.
“There is hunger everywhere and every segment in Nigeria has agreed that there is hunger in the land. With empty stomach, I don’t think that anybody can give any meaningful advice or create more opportunities or jobs and generate money for investment in the market”
He called on the government to review downwards high sanctions on listed companies for flaunting rules
“I want to tell you that the results that will come out this year will be mostly deficit result and for you to tell companies to pay N200 million, N300 million in penalty is not possible. These are companies that have been financing their infrastructure development.
When Obama came to power in the USA, the country was in recession, but he assisted companies and pumped liquidity into the system and within a short period the economy reversed, better than what Obama met,” Nwosu said.
He, however, re-echoed that the investing in the capital market is still the best form of savings. “We urge the regulators to continue their enlightenment and increase their respect for retail shareholders because they are the people that will stand to support the capital market. While the foreigners exit, the retail shareholders remain, that is why they require respect”
