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Investors lost over N4 trillion in 2018

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Graph showing investment

Contrary to analysts’ expectations that the surge witnessed in the performance of the nation’s bourse in 2017 would translate to a high investment yield in 2018, stock market activities last year, remained feeble across sectors, as investors lost a whooping N4.2 trillion.

Market watchers had predicted that the performance of listed firms will trigger an upturn in market activities last year, even as the investment inflow into the country, which doubled to $4.2 billion in the third quarter (Q3) of 2017 from Q4 2016, will spill over to 2018.

According to them, there were strong indications that portfolio inflow into Nigeria would rise tremendously in 2018, as investors are expected to actively involved in frontier market activities.

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Predictions crashed

Regrettably, the challenging business climate occasioned by election anxiety, insecurity and unfavourable government policies constrain expected yield in the nation’s bourse across all segments.

Indeed, the bourse for a significant period experienced continuous drop in the prices of shares and lack of liquidity following investors’ apathy.

After posting a 26 per cent loss in 2016, the Nigerian equities market gathered momentum in 2017, with an increase of N4.5 trillion in market capitalisation.

This was from N9.158 trillion opening on January 3, to N13.519 trillion on December 28, 2017. The All-Share Index (NSE ASI) rose by 43 per cent from 26, 616.89 to 37,990.

The rally extended to 2018 as market capitalisation of listed equities which stood at N13.617 trillion as at January 2, 2018 rose by N2.074 trillion or 13.2 per cent to N15.691 trillion on Friday, January 26.

Also, the All-Share Index, which opened at 38,264.79 rose by 5,508 points or 12.6 per cent to close at 43,773.76.

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Surprisingly, after the January and mid-February rally, the market recorded unprecedented reversal in performance contrary to analysts’ predictions.

The capitalisation, which stood at N15,549 trillion as at Wednesday, February 28, fell to N11.337 trillion by Friday, December 28, representing a N4.2 trillion or 37 per cent loss.

Also, the All-Share Index declined by 12,292 points or 39 per cent to 31,037.72 from 43,330.54, achieved on February 28, 2018.

Analysts and operators blamed the flattish condition on the tension that plagued the political space in 2018. They said killings by Fulani herdsmen and cases of political thuggery aggravated apathy investment in, especially by foreign investors.

Strategic initiatives required

Irked by the free fall of equities, coupled with the unprecedented lull in the market; stakeholders not only expressed their displeasure on the unfavourable government policies, but also called for new strategic initiatives to reverse the weak macroeconomic scenario.

For instance, an independent investor, Amaechi Egbo, said:

“Investors in the Nigerian capital market are not having a good time as many shareholders are still counting their losses, as the market has been on a continuous nose-dive with occasional unsuccessful recovery-attempts since the end of March 2018.”

He therefore urged the Federal Government to reverse the situation by encouraging local investors and injecting liquidity into the market.

Similarly, the Managing Director of Highcap Securities, Imafidon Adonri, also regretted that the market which was ranked the best performing in the world in 2017, suddenly become the worst in 2018.

For him, this is an indication that macroeconomic policies that should have propelled a viable capital market deteriorated so severely in 2018.

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“So far, it has been a market that is seriously challenged, and we hope that in 2019, some of the factors that prevented the market from performing its role would have normalised. For instance, the political risks would have come to an end, hopefully, with a successful election. Also, the crude oil market would have recovered, and the fiscal policies that would drive the internal economy and the market to create more wealth would have been instituted.”

He continued: “If you look at the primary sector, almost no capital was formed from the market last year; what was formed was so paltry, then if you look at the secondary market, it depreciated by more than 20 per cent last year.

“Although the figures released showed that Nigeria is out of recession, but the growth witnessed so far is immaterial when compared to the population size. This implies that many Nigerians are at poverty bracket, so disposable income that normally propels the market is shrinking because if poverty is increasing, savings will continue to decline,” he added.

The Chief Relationship Officer, Foreshore Securities Limited, Charles Fakrogba, noted that for the market to record some reasonable level of recovery in 2019, politicians must desist from utterances capable of heating up the system.

He added: “The politicians should let us know their programme and what they intend to do when they assume office so that the market can factor all these in its price mechanism in 2019 for speedy recovery.”


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