Uncertainty, insecurity, others undermine efforts to restore market confidence
Piqued by the free fall in equities prices and the unprecedented lull that besieged the nation’s stock market activities in the past few years, investors, yesterday, called for new and strategic ideas that will reverse the current weak scenario in 2020.
For instance, at the close of transactions on December 31, 2019, the All-Share Index, which measures the performance of quoted companies, depreciated by 4,588.43 points or 17.09 per cent to 26,842.07 points from 31,430.50 points at which it opened the year on January 2, 2019.
However, with the two major listings- MTN Nigeria and Airtel Africa, witnessed during the period, the market capitalisation of listed equities, which opened for the year at N11.720 trillion, gained N1.238 trillion to close trading on December 31, 2019, at N12.958 trillion.
MTN Nigeria on May 16, 2019, listed by introduction, 20.35 billion ordinary shares at N90 per share, lifting the market capitalisation by N1.83 trillion.
This listing was part of efforts by the regulators towards building a dynamic and inclusive market, as well as creating channels for sustainable investment.
Also, Airtel Africa, in July, listed its ordinary shares on the main board of the NSE at N363 per share.
The investors, who expressed displeasure over what they described as “unfavourable government policies,” also listed other factors identified as a setback to the market, including policy instability, insecurity, and delisting of companies.
Other are rising exchange rate, port congestion, lack of liquidity, high-interest rate, multiple taxations, infrastructure deficiency, forex instability and slamming of huge fines on listed companies.
The investor argued that these factors have caused the market to trail behind peers in other emerging markets.
Therefore, they suggested that the federal government should revive the businesses of listed companies, encourage local investors by reviewing tax on transactions and injecting liquidity into the stock market.
The Head of Research at FSL Securities, Victor Chiazor, said the stock market in 2019 has been a tough year for investors, especially with the market staying bearish for the most part of the year.
According to him, the overall market index ended 2019 on a negative note, losing trillions of Naira in the process, arguing that market position opens up a lot of opportunities for investors in the new year as prices remain largely depressed and companies are expected to declare their full-year result.
“This market position opens up a lot of opportunities for investors in the new year as prices remain largely depressed and companies are expected to declare their full-year result and dividend for the 2019 calendar year in the first quarter of the year 2020.
“In the new year, improved company earnings will be a major driver of stock prices while activities in the Nigerian capital market at large will be shaped by market-friendly policies by both the fiscal and monetary authorities as they would face a hard task of backing some of their unpopular policies aimed at spuring economic growth,” he said.
The Executive Vice Chairman of Highcap Securities, Imafidon Adonri, noted that the primary and secondary markets for debt instruments were very active in 2019, especially for federal government bonds.
However, he pointed out that the debt market for corporate bonds was not very active because the Federal Government dominated issues in the primary market, turning out bonds with high yields that crowded out the other sectors.
“Through innovative monetary policies, interest in FGN Savings bond was reawakened in the last quarter of the year. The high demand for FGN Bonds, although at unsustainable interest Rate exposed the supply gap in the instrument.
“Following the same pattern since the global meltdown, the primary market for equities was dormant. There was almost no offer for subscription.
“The few public issues were by way of rights thus indicating that issuers’ confidence in the equities market is still very low. The secondary market was weak for most parts of the Year. The All-share index fell. Volume and value of shares traded also fell below expectations.
“While investors suffered huge losses in the Secondary Market, several Market Operators could not sustain their operations during the year due to low patronage and erosion of investment.
“The precarious state of the corporate debt and equities markets can be linked to the crowding-out effect of FGN securities, flight to safety of sovereign debt due to loss of confidence in the crawling economy and dearth of enabling public policies to drive liquidity and profitability of the equities market,” he said.
For the Publicity Secretary of the Independence Shareholders Association of Nigeria, Moses Igbrude, the stock market performance was neither here or there.
“I say this because some companies paid good dividends especially the banks even with the challenging economic environment but the stock prices were generally poor and extremely under value throughout this 2019.
“Many companies have delisted from the exchange because of environmental factors and government policies. FG policies instability, insecurity, Port congestion multiple taxation, infrastructural deficiency forex instability are factors impeding the growth of the market,” he said.
He urged the government to take issues concerning the market more serious in 2020, noting that the market still remains the barometer for measuring the economy of any nation.
According to him, the government must provide the necessary support through initiating good policies that will impact the economy and ultimately grow the market.
“In 2020, we need policies that will enhance infrastructural development, improve power stability, eliminate ports congestion by opening up other ports in other parts of the country and harmonise all taxes for easy payment.
“ A situation where tax consultants will slam five to seven years tax worth over N100 billion on a company so that the management will start negotiating is not an idea in modern society. Government and companies should be a partnership in progress,” he added.