Foreign investors, companies flee Nigeria, stock market turnover drops to N10.3bn as Buhari's economic policies backfire
The country’s stock market recorded a drop in liquidity to the tune of N411m in one month.
The drop reflected on the volume and value of shares traded between August 12 and September 9, 2016.
A turnover of 1.183 billion shares worth N10.300bn in 16,522 deals were traded last weekend by investors on the floor of the Nigerian Stock Exchange. This, however, is in contrast with a turnover of 1.361 billion shares worth N10.711bn in 16,070 deals, which were traded four weeks ago (one month) by investors on the Exchange.
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 share turnover, the less liquid the shares of companies quoted on the Exchange and vice versa.
As of September 9, the financial services industry (measured by volume) led the activity chart with 1.015 billion shares valued at N7.136bn traded in 11,012 deals; thus contributing 85.83 per cent and 69.28 per cent to the total equity turnover volume and value respectively.
The conglomerates industry also followed with 69.777 million shares worth N473.308m in 564 deals.
The third place was occupied by the services industry with a turnover of 42.223 million shares worth N75.881m in 202 deals.
Trading in the top three equities namely – United Bank for Africa Plc, Guaranty Trust Bank Plc and FBN Holdings Plc (measured by volume) accounted for 444.004 million shares worth N4.958bn in 4,153 deals, contributing 37.53 per cent and 48.13 per cent to the total equity turnover volume and value, respectively.
However, as of August 12, the financial services industry (measured by volume) led the activity chart with 1.237 billion shares valued at N7.913bn, traded in 9,544 deals; thus, contributing 90.87 per cent and 73.88 per cent to the total equity turnover volume and value, respectively.
The conglomerates industry followed with 46.182 million shares worth N77.192m in 637 deals. The third place was occupied by the consumer goods industry with a turnover of 38.102 million shares worth N1.372bn in 2,907 deals.
Trading in the top three equities namely – Wapic Insurance Plc, FBN Holdings Plc and Guaranty Trust Bank Plc (measured by volume) accounted for 666.721 million shares worth N5.064bn in 3,205 deals, contributing 48.99 per cent and 47.27 per cent to the total equity turnover volume and value, respectively.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema, at the end of last month, 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.
One of the initiatives, according to him, is X-Boss, which automates and enhances the regulatory and oversight function of the NSE over its dealing members in the area of rendition of regulatory filings, analysis of financial renditions, capital and liquidity monitoring as well as compliance monitoring and reporting in line with global best practices.
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 the country in the second quarter of this year recorded its lowest investment inflow in nine years.
The participation of foreign investors in the NSE 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 the foreigners at 51.57 per cent for January 2016. But for February 2016, the number dropped to 36.48 per cent.
To this end, the President and Chairman, Governing Council of the Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, in an interview, said Nigeria’s natural endowments still made 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 our current political stability. However, they will be further encouraged if we also have some consistency with our foreign exchange policies in line with the 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 the 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.”
Abe explained that the direction of the capital market at any given time was a reflection of the economy and “it’s been known that the economy has not been doing too well lately. In this regard, it is even the best time to invest in the capital market because once the economy gets better, the capital market will recover as well.”
Some of the factors that draw investors into the capital market, according to him, are positive expectation about the economy; adequate and positive information about the market; security of investment; good returns in the form of dividends and / or capital gains, and favourable government policies.