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Nigeria @ 60: How the NSE evolved with key national policies

As Nigeria marks its 60th anniversary, it is imperative to review the NSE, considering its key impact on national economy.

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Nigeria got her independence from Britain in 1960. A year later, on September 15, 1961, trading commenced on the Lagos Stock Exchange, later renamed the Nigerian Stock Exchange (NSE) with 19 securities listed, 3 equities, 6 FG bonds, and 10 industrial loans

As of Q2 2020, the NSE is one of the largest in Africa, with 366 listed securities and a market capitalization of $74 billion, which is an 11.23% growth from last year. Average daily transactions grew by 19.64% from last year, these are positives for the NSE. A red flag observed, was the exit of foreign investors, which has continued since 2018 from 50.70% to 39.52%. In dollar terms, this is a fall in transactions from $3.35 billion to $1.03 billion.

READ: Data war: MTN gains 1.69 million subscribers, as Airtel dusts Glo, 9mobile in July

The NSE has been somewhat of a barometer of the Nigerian economy, tracking the different economic models of the government of the day. As Nigeria reaches the 60th year of her independence, it is imperative to review the NSE, considering these key national economic events.

The first big legislation to affect the NSE, was the 1972 indigenization policy in the Nigerian Enterprises Promotion Decrees (NEPC). The purpose of the law was to transfer ownership of foreign-owned firms, listed and/or operating in Nigeria, from foreigners to Nigerians. In banking for instance, Nigerians were to own 60% equity in any bank operating in Nigeria. This policy had its positives and negatives, from just six (6) companies listed from 1960 to 1969, eighty-four (84) firms were listed in the period from 1970 to 1979, mostly in Consumer and Industrial goods, and healthcare. Other policies, including the Income Tax Management Act of 1961 and The Insurance Miscellaneous Provisions Act of 1964, mandated pension and provident schemes to invest at least one third and a quarter of their funds respectively, in Nigerian Government Stocks. The NEPC can be argued to have set up the NSE for growth.

GTBank 728 x 90

READ: Nigerian banks top list of NSE companies with highest employees

The NEPC, though well-intended, did cause some divestment, especially in financial services. Many banks including Citibank and Standard Chartered completely left Nigeria, others like Chase Manhattan and Bank of America, sold 60% equity and changed their names. The effect of this reduction in majority ownership by large Western banks was that Nigeria lost local credit access to foreign-owned banks. The New York Times article in 1976, asserted that the policy of ‘indigenization’, “will discourage the flow of investment capital to Africa’s biggest marketplace, Nigeria.”

The lasting effect of this divestment was that as federal borrowing increased, the NSE was unable to meet the liquidity needs of the FGN, and the CBN stepped in, funding the government via ways and means in significant amounts, even to this day.

GTBank 728 x 90

Another positive from the NEPC, was the creation by the NSE, of the Second Tier Securities Market, which allowed Small and Medium enterprises to access the stock market for funds, expansion, and price discovery.

The next big policy change was the Structural Adjustment Program of 1986 (SAP). As oil prices crashed in the late 1980s, Nigeria ran into significant current account deficits, with crude oil gone temporarily as a source of foreign exchange income. SAP, with structural reforms overseen by the IMF and World Bank, called for liberalization of the Nigerian markets and enhancing the rights of foreign investors. Hence, the NEPC was repealed, the economy was liberalized, then privatization and commercialization of government-owned enterprises soared. This SAP period coincided with a rise in the number of listed companies from 42 in 1978 to 196 in 1999. Its growth was driven by the listing of new banks and financial services; almost 100 new listings, and a direct consequence of the SAP liberalization.

The third big action was a return to democracy in 1999, this enhanced and attracted new capital market flows to Nigeria. Another key positive that has impacted the NSE has been the pension reforms, which have given the market a steady source of long-term financing. As of 30th June 2020, the Pension Asset Managers have about N9trillion of various asset classes, listed on the NSE.

The Challenge

The NSE has from 1961 to 2019, delisted a total of 150 companies, mostly from Financial Services, and Industrial and Commercial goods. To be specific, the NSE has shrunk the number of equities listed, from a high of 217 in 2010 to 163 as of June 2020. Although, the reason for delisting is largely regulatory in financial services. The Securities and Exchange Commission of Nigeria, warns that the NSE must seek to remain relevant, by having more companies listed.

This is the challenge for the NSE going forward; how to attract more companies to list and become a part of her.

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Stock Market

Bulls keep Nigerian Stocks fired up W/W amid #EndSARS

Twenty-eight (28) equities appreciated at price during the week, lower than thirty-five (35) equities in the previous week.

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Nigerian bourse against all odds remained resilient last week, as it recorded impressive gains. The Nigerian All-Share Index and Market Capitalization both appreciated by 0.13% to close the week at 28,697.06 and N14.999 trillion respectively.

  • A total turnover of 1.505 billion shares worth N19.668 billion in 20,552 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 1.955 billion shares valued at N22.978 billion that exchanged hands last week in 22,844 deals.
  • The Financial Services industry (measured by volume) led the activity chart with 1.196 billion shares valued at N14.950 billion traded in 11,318 deals; thus contributing 79.47% and 76.01%to the total equity turnover volume and value respectively.
  • The Conglomerates Industry followed with 97.167 million shares worth N269.045 million in 516 deals. The third place was the Consumer Goods, with a turnover of 77.588 million shares worth N1.928 billion in 3,461 deals.
  • Trading in the top three equities namely Guaranty Trust Bank Plc, Access Bank Plc, and United Bank for Africa Plc (measured by volume) accounted for 633.527 million shares worth N10.006 billion in 3,887 deals, contributing 42.08% and 50.87% to the total equity turnover volume and value respectively.
  • Twenty-eight (28) equities appreciated at price during the week, lower than thirty-five (35) equities in the previous week. Thirty-five (35) equities depreciated in price, higher than twenty-three (23) equities in the previous week, while ninety-nine (99) equities remained unchanged, lower than one hundred and four (104) recorded in the previous week.

Top gainers

  1. INTERNATIONAL BREWERIES PLC. up 18.20% to close N6.30
  2. CUTIX PLC. up 17.28% to close N1.90
  3. NASCON ALLIED INDUSTRIES PLC up 10.00% to close N14.30
  4. JAPAUL OIL & MARITIME SERVICES PLC up 10.00% to close N0.22
  5. IKEJA HOTEL PLC up 9.90% to close N1.11
  6. CONOIL PLC up 9.72% to close N15.80
  7. NEIMETH INTERNATIONAL PHARMACEUTICALS PLC up 6.49% to close N1.97
  8. LIVESTOCK FEEDS PLC. up 6.35% to close N0.67
  9. FIDSON HEALTHCARE PLC up 6.29% to close N3.72
  10. FLOUR MILLS NIG. PLC. up 6.24% to close N23.00

Top losers

  1. N NIG. FLOUR MILLS PLC. down 9.89% to close N4.19
  2. LINKAGE ASSURANCE PLC down 9.09% to close N0.40
  3. ETERNA PLC. down 8.98% to close N4.46
  4. REGENCY ASSURANCE PLC down 8.33% to close N0.22
  5. ROYAL EXCHANGE PLC. down 8.00% to close N0.23
  6. MAY & BAKER NIGERIA PLC. down 7.69% to close N3.00
  7. LASACO ASSURANCE PLC. down 7.14% to close N0.26
  8. ACADEMY PRESS PLC. down 6.90% to close N0.27
  9. CADBURY NIGERIA PLC. down 6.83% to close N7.50
  10. HONEYWELL FLOUR MILL PLC down 6.19% to close N0.91

Outlook

Nigerian Stocks remained resilient W/W amid EndSARS protest, falling oil prices W/W, and most importantly looting and destruction of properties carried out by hoodlums at Nigeria’s major economic hubs

  • Sequel to the carnage recorded at Nigerian urban areas the first two trading days of the week ended flat, as investors remained on the sidelines, and mid-week sessions saw investors losing over N100 billion.
  • However, the bulls strengthened their resolve and overturned previous losses recorded as many NSE30 Stocks exhibit good fundamentals and remained undervalued with respect to other Sub Sahara listed stocks, thereby leading to impressive gains across the market spectrum on Thursday and Friday’s trading sessions.
  • That said, Investor sentiments as measured by market breadth remains impressive amid relatively thin market liquidity that has become the norm since the COVID-19 pandemic took a hit on Africa’s largest economy.
  • Nairametrics, envisage cautious buying amid growing geopolitical uncertainty across Nigerian borders, which continue to put pressure on Nigeria’s major export earning product, crude oil..in spite of OPEC compliance effort in recent weeks.

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Market Views

GTBank, Dangote Cement keep Bulls roaring high

Market breadth closed positive as NASCON led 20 Gainers as against 6 Losers topped by NNFM at the end of today’s session.

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Nigerian stock market ended its last trading session on an impressive note. The All Share Index gained 0.47% to close at 28,697.06 points as against +0.40% appreciation recorded on Thursday.

Nigerian Stock Exchange market capitalization now stands at N14.99 Trillion. Its Year-to-Date (YTD) returns currently stands at +6.91%.

  • However, the Nigerian bourse trading turnover fell short of expectation as volume moved dipped by 9.11% as against -4.67% downtick recorded on Thursday. ACCESS, GUARANTY, and UBA were the most active to boost market turnover.
  • AFRINSURE leads the list of active stocks that recorded an impressive volume spike at the end of today’s session.
  • Market breadth closed positive as NASCON led 20 Gainers as against 6 Losers topped by NNFM at the end of today’s session – an improved performance when compared with the previous outlook.

Top gainers

  1. NASCON up 10.00% to close at N14.3
  2. PZ up 7.32% to close at N4.4
  3. ZENITHBANK up 1.69% to close at N21
  4. GUARANTY up 1.50% to close at N30.45
  5. DANGCEM up 0.67% to close at N151

Top losers

  1. NNFM down 9.89% to close at N4.19
  2. NPFMCRFBK down 4.29% to close at N1.34
  3. HONYFLOUR down 4.21% to close at N0.91
  4. UNIONDAC down 3.70% to close at N0.26
  5. VITAFOAM down 3.23% to close at N6

Outlook

GTBank 728 x 90

Nigerian bourse continued its bullish run amid a shutdown of economic activities at Nigeria’s economic nerve center Lagos and Rivers amid ongoing curfew put in place in order to calm hostilities prevalent in some areas.

  • Bulls seem to be rallying high amid soaring crude oil prices, and high buying pressure noticed in some Nigerian blue-chip stocks like Dangote Cement and GTBank.
  • However, Nairametrics expects you to seek the advice of a certified stockbroker when choosing stocks to buy, as some of these stocks exhibit cyclic returns in principle.

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Market Views

#EndSARS Bull return to Nigerian Stock Market amid Looting

The market breadth index was positive with 20 gainers against 10 losers.

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investors, Bulls gain momentum, as stimulus package lifts global financial markets, Bulls boost global financial market, gold hits 7 years high, Dangote, Tier-1 banks lead the bulls to close Nigerian stock market green

Nigerian bourse advanced today by 0.40%, to close at 28,563.87 points. The All Share Index was up by 0.40%, with the year-to-date return at +6.39% and market capitalization at N14.92 trillion. Investors gained N59.78 Billion.

  • A total volume of 311.3 million units of shares, valued at N469billion exchanged hands in 3,375deals. GUARANTY was the most traded shares by volume and value at 77.8million units and N2.33billion.
  • The market breadth index was positive with 20 gainers against 10 losers. UACN (+8.33%) led the gainer’s chart today, while GLAXOSMITH (-3.57%) topped the laggards.
  • All sectors were bearish – Insurance, Oil & Gas, Consumer Goods, and Banking were lowered by 0.93%, 0.07%, 0.06%, and 0.03%, respectively save for the Industrial sector index which appreciated by +0.15%.

Top gainers

  1. UACN up 8.33% to close at 8.33%
  2. STANBIC up 2.33% to close at 2.33%
  3. DANGSUGAR up 2.22% to close at N13.8
  4. WAPCO up 2.02% to close at N17.65
  5. MTNN up 1.45% to close at 1.45%

Top losers

  1. GLAXOSMITH down 3.57% to close at N5.4
  2. INTBREW down 2.95% to close at N6.25
  3. CAP down 1.07% to close at N18.5
  4. FBNH down 0.82% to close at N6.05
  5. ZENITHBANK down 0.72% to close at N20.65

 

Outlook

Nigerian bourse against all odds recorded impressive gains. The gain was recorded amid, falling crude oil prices, and significant records of looting at a number of Nigerian urban areas triggered by the ongoing political unrest in Nigeria.

  • Buying pressure from NSE30 stocks like MTN Nigeria, Stanbic IBTC Bank, Dangote Sugar, UACN lifted the All Share Index value upward.
    Investors maid the prevailing macro are repositioning their portfolio for Q3 earning results amid a drop in market liquidity at Thursday’s trading session.
  • Nairametrics, still envisage readers to be cautious about choosing stocks to buy, on reports coming from the Lagos Chamber of Commerce and Industry (LCCI) revealing Nigeria had lost more than N700 billion in economic value since the #EndSARS protests started a few weeks ago.

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