Capital market investors lose N873bn in 12 months

Stanley Opara

Investors in the Nigerian capital market (equities category) have recorded a loss of N873bn in the past 12 months.

Between September 28, 2015 and Wednesday, the Nigerian Stock Exchange market capitalisation dropped from N10.572tn to N9.699tn, while the All-Share Index fell to 28,236.23 basis points from 30,762.29 basis points.

There was also a significant drop in the volume of transactions in the market from 266.652 million to 159.046 million in the period.

Similarly, the value of market transactions and deals have plummeted in the 12-month period. On September 28, 2015, the value of transactions and market deals stood at N3.179bn and 3,366 respectively, while the figures had dropped to N1.454bn and 3,237, respectively by Wednesday.

The fall in the capital market indices has persisted for some period now. Between August and Wednesday, the stock market had recorded a drop in liquidity of N0.411bn.

The drop reflected on the volume and value of shares traded in the 12-month period, which also plummeted.

A turnover of 1.183 billion shares worth N10.300bn in 16,522 deals were traded in September 2015 by investors on the floor of the NSE. This, however, is in contrast to a turnover of 1.361 billion shares worth N10.711bn in 16,070 deals traded in August 2016.

Share turnover is a measure of stock liquidity calculated by dividing the total number of shares traded over a period by the average number of shares outstanding for the period. Thus, the lower the turnover, the less liquid the shares of companies quoted on the Exchange are and vice versa.

The Chief Executive Officer, NSE, Mr. Oscar Onyema, at the end of last month, had said the Exchange would continue to do its part in ensuring that a competitive platform was provided for players to participate in the financial market.

He said in addition to the Minimum Operating Standards recently launched by the Exchange, “We have executed several initiatives to strengthen the operations of our dealing members and to make them comparable with their foreign counterparts.”

Onyema further explained that the Exchange had implemented a strong regulatory environment to protect investors against infractions, while enhancing investor confidence in the market.

The National Bureau of Statistics had said in the second quarter of this year that the country recorded its lowest investment inflow in nine years.

The participation of foreign investors in the Nigerian stock market fell by 15 per cent between January and February this year, according to data from the bourse.

The NSE had put the level of participation by foreigners at 51.57 per cent for January 2016. But for February, it dropped to 36.48 per cent.

Investors in the country’s capital market (equity category) had lost over N1.053tn in the first quarter of this year.

Within three months (January to March), the equities market has depreciated by 10.79 per cent, according to NSE data.

As of the first day of trading this year (January 4), the NSE market capitalisation stood at N9.757tn, while the All-Share Index was 28,370.32 basis points.

But as of March 31, the market capitalisation and All-Share Index crashed to N8.704tn and 25,306.22 basis points.

Investors had also made huge losses in the Nigerian equities market last year as the market capitalisation (equities only) of the NSE shed a total of N2.354tn between December 2014 and December 2015.

To this end, the President and Chairman, Governing Council of the Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, said Nigeria’s natural endowments still make it a very attractive investment destination. However, he noted that this must be strategically supported by well thought-out policies.

He added, “The truth of the matter is that many foreign investors still regard Nigeria as a good investment destination, because of the current political stability. However, they will be further encouraged if we also have some consistency with our foreign exchange policies in line with global best practices.

“At the heart of the capital market is the issue of participation of local investors. Expectedly, it is the local investors who ultimately will bring stability to the equity market.”

He said stakeholders in the market were bound to worry when the market was in a downward swing. But this, he noted, was one of the attributes of stock markets globally, stressing that it was only normal for the market to swing upward and downward, because “that is what makes it a market.