How Nigerian Stock Exchange Indexes Are Calculated

The Nigerian bourse began publishing The NSE 30 Index in February 2009with index values available from January 1, 2007. On July 1, 2008, the NSE developed four sectorial indices with a base value of 1,000 points, designed to provide

investable benchmarks to capture the performance of specific sectors. The sectorial indices comprise of the top 10 most capitalized and liquid companies in the Banking, Insurance and Food/Beverage & Tobacco (now Consumer Goods) sectors and the top five most capitalized and liquid companies in the Oil & Gas(Petroleum Marketing) sector.

The indices, which were developed using the market capitalization methodology, are rebalanced on a biannual basis  -on the first business day in January and in July.

According to  the Index Committee, “The NSE 30 is a modified market capitalization index based on the following methodology: The number of stocks is fixed at 30; the stocks are picked based on their liquidity, that is, the average daily value of three months is used as liquidity criteria; no sector can have a weighting of more than 40 percent. No sector can have a weighting of less than 2 percent and no individual listed equity can have a weighting of more than 20 percent.

“Sectorial Indices have the following methodology: The number of stocks is fixed at 10;excluding the Oil & Gas Index which is fixed at 5.The eligible equity universe is the top 10 most liquid companies in the sector; with the exception of the Oil & Gas Index,where the eligible equity universe is the top 5 most liquid companies. Average daily 3 months volume is used as liquidity criteria for the Sector shares and no company can have a weighting of more than 50 percent.
“The compiler of the indices maintains the right to modify the circulated selection above in connection with any mergers, takeovers, suspension or resumption of trading during the period before the effective date of the annual review.”