Equity market records growth profile

The Nigerian equity market which witnessed low performance at the beginning of 2017, closed at the end of the year in an upward trend. In this report, AMAKA IFEAKANDU looks at the key factors that contributed to the growth of the market
The nation’s equity market which witnessed low performance in the first quarter of the year took positive trend at the end of 2017, gaining N 4.363 trillion.
The Nigerian Stock Market in the first three months of 2017 depreciated by N418 billion or 4.5 per cent to close at N8.828 trillion.
The All Share Index also declined by 1358.28 basis points or 5.1 per cent to 25516.34 from 26874. 62 points it closed in December 2016.
But the review of foreign Exchange policy in April by the Central Bank of Nigeria (CBN) which led to the introduction of Investors and Exporters Forex Window (I&E FXw) boasted forex liquidity and enhanced the activities in the market.
The policy according to financial operators resulted in a relative stable exchange rate regime and impacted positively on the manufacturing sector and economic activities.
The rally in equities price was supported by rising in crude oil prices that helped to the increase of external reserves and government revenue at a time the federal government unveiled its Economic Recovery and Growth Plan (ERGP).
The ERGP was set principally to structure the government’s economic diversification which listed Muhammad Buhari’s administration focus on infrastructure development and agriculture to ensure self-funded sufficiency in food production and create employment for youth and further drive recovery and growth in the economy.
Operators also said that good performance of some companies and positive economic data released during the year indicating the prevailing economic expansion that strengthens the market and economic fundamentals, hike domestic and foreign investors’ confidence and increase demand for equities in the market.
However, the sustained intervention in the forex market by the CBN helped to improve liquidity in the system.
Although the apex bank has tight monetary policy during the year, inflation rate declined slowly with expansionary manufacturing sector as shown by the Purchasing Managers Index (PMI) that remains at 59.3 points at the end of December 2017.
The growth in the market was also driven by technology deployed by NSE to promote transparency which encourages more investors to participate in the market as trading were made easier through online platforms.
Meanwhile, the zero tolerance policy adopted by the Capital market regulator, Securities and Exchange Commission (SEC) against any infractions encouraged more investors to play the market.
The most popular action taken by SEC on its zero tolerance within the year was the suspension of trading of Oando Plc’s shares on the NSE and appointment of forensic auditors led by Alan William Deloitte to audit the account of the company. Partnership Investment Company was also suspended for unauthorised sale of clients shares.
All these factors according to capital market analysts contributed to the performance of the market which closed on 29 December 2017. Operators said that SEC actions signalled that apex regulator of the market is out to sanitize the market by all means.
A review of the trading activities showed that specifically, market capitalisation of listed equities appreciated by N4.363 trillion or 46.91 per cent, closing at N13.609 trillion from N9.246 trillion recorded the preceding year.
Also the NSE All Share Index added 11,368.58 basis point to 38243.19 points after opening the year at 26874.62 points, representing growth of 42.30 per cent.
Commenting on the performance of the market, Managing Director, APT Securities and Fund Limited, Malam Garba Kurfi said that despite the recession witnessed in the economy, capital market has performed very well for the 2017 financial year with the two market indicators closing in a positive trend ahead of all other Financial instruments such as Treasury Bills, FGBN CPs, Fixed deposits rates among other.
He said that the most interesting performance was that all the gain was made in the last half of the year from July to December 2017. The Banking index closed with 73.32 per cent ahead of all other index while Oil Sector remained the least performance with 5.76 per cent. Speaking further he said “the performance is the best in the last eight years.” This was possibly after three consecutive years of negative loss by the index.
The growth in the market according to him was also possible as a result of change of FX policy by CBN that ushered in the Export – Import FX window. The policy brought back the confidence of foreign investors since July to the end of the year as they continued to lead transactions in the capital market.
He, however, said that the increase in Crude oil price boosted Foreign Reserve by more than 50 per cent to $38.6 billion. He said if they sustained the price it will positively increase the Foreign Investors participation in the market. Kurfi who was optimistic that the CBN will sustain the policy said “We are also hopeful that MPR will come down together with the TBs which will force Institutional Investors to play in Capital market than ever before.
Other things he said that placed the market above bar was the company’s performance for the year end December 2017. He said that some companies performed better in term of profit as well as in dividends pay out which we believe will bring another rally of the price of stocks.