‘Non-representation of critical sectors in capital market unsettling stakeholders’

An economist, Biodun Adedipe has advocated proper representation of critical sectors such as agriculture, power, and real estate in the capital market to stimulate Nigeria’s Gross Domestic Product (GDP) growth.

At the 11th yearly conference, Investiture of Fellows, Inductions of Associates, and yearly General Meeting of the Institute of Capital Market Registrars (ICMR), held in Lagos at the weekend, Adedipe argued that major sectors that constitute nation’s economic growth are not represented in the capital market.

He pointed out that the current performance of the Nigerian capital market does not reflect on the nation’s GDP growth. Speaking on the theme of the conference: ‘Sustainability of the Nigerian Capital Market as a catalyst for Economic Growth and Prosperity’, he said the common assumption that the stock market and economy move side by side has weakened in recent times, stating that critical sectors that largely contribute between 70 per cent to 85 per cent of the Nigerian GDP are yet to be incorporated into the market.

Indeed, at less than 15 per cent of the country’s GDP, with a capitalisation of $56.6 billion and 177 listed firms, experts say the current size of the market in volume, liquidity and sectoral representation has constrained its contribution to national economic development.

The figures are low when compared to the Johannesburg Stock Exchange (JSE) with a total capitalisation of $1.06 trillion, representing over 235 per cent of the country’s GDP and over 370 listed companies.

The volume of activities at Nigeria’s market pales into insignificance when compared with the New York Stock Exchange (NYSE) whose market capitalisation is about $21 trillion with over 2,000 listed companies.

The top four capitalised stock exchanges in Africa are in South Africa, Egypt, Morocco and Kenya. Each of them is ahead of the Nigerian Exchange Limited (NGX) in market cap.

Adedipe said: “In fact, movements in the market and the economy are no longer synchronised because they do that for just a while and thereafter they diverge. I found a very weak correlation between the movement’s growth of the major metrics in our stock market, with the growth of our GDP with very weak and negative covariance.

“The market capitalisation is less than 10 per cent of GDP. In some jurisdictions, you see it up to two 250 per cent and 300 per cent.
Some of the major sectors that contribute the most to GDP are not well represented in this capital market.

Speaking on the topic, “Role of Digital Technology in the Nigerian Capital Market”, the Chief Executive Officer of the Nigerian Exchange Limited (NGX), Temi Popoola, said the country and the globe have made huge progress in digitalisation.

According to him, “When we talk about digitalisation, for example, it is important to realise that we made a lot of progress, both globally and also in Nigeria. It is over 25 years now that the capital market globally has been paying attention to technology.”

He stressed the need for the exchange to scale up its digitalisation exercise to attract a more youthful population into the market. On his part, the Chairman of Chams Plc, Ademola Aladekomo whilst quoting data from a Straw poll conducted by his company, said proper identity management of the investors in the capital market would lead to tremendous growth.

He also stated that the investors found the KYC process too tedious and not simplified, especially for those who had shares, using different companies.

Aladekomo further advised the regulators to find strategies to bring tech companies that would entice the millennials into investing in the Nigerian capital market.