•Lament eight years of IPO apathy
•Say fiscal, forex reforms will attract investors

With improved activities in the secondary market, operators have renewed the call on the government to implement policies that will engender fiscal discipline and prudent management of resources to augment the liberalisation of the foreign exchange market (forex) and ultimately trigger the reawakening of the primary market segment.

The primary market is where securities are created, while the secondary market is where investors trade those securities. In the primary market, companies sell new stocks and bonds to the public for the first time, such as in the case of Initial Public Offers (IPOs).

According to stockbrokers, government’s failure to entrench fiscal discipline, and prudent management of state resources have resulted in prolonged instability in the exchange rate market and increased capital flight.

They urged government to plug all loopholes in the fiscal space to pave the way for positive economic performance, sustainable rebound, increased demand for securities and resurgence of the IPOs, noting that fiscal policy actions have been slow in the past few years.

The stockbrokers argued that only strict adherence to fiscal responsibility provisions could enhance a sustainable boom, stimulate demand for securities, boost the volume of transactions and revive the current inactive primary market.

The operators pointed out that the large volume of transactions recorded currently in the secondary market is an opportunity for issuers to approach the market and raise capital at a cheaper rate.

They also noted that the resurgence of activities in the primary market would revive the operations of stockbroking firms that are currently struggling to survive. Most of these firms require steady patronage from retail investors to become more active.

An eight-year breakdown of stock market indices showed that the capitalisation of the NGX, which stood at N11.66 trillion on the eve of former President Muhammadu Buhari’s inauguration in 2015, now stands at N34.273 trillion as at Monday, July 17, 2023, adding N22.6 trillion or 65.9 per cent.

The all-share index also rose from 28,902.23 points to 62, 943.35 points, representing 34041.12 points or 54 per cent gain.

This, is in addition to the positive steps taken by President Bola Tinubu’s administration to grow the nation’s economy which have continued to spur an unprecedented rebound in the bourse, causing the stock market to return N5 trillion gain in H1.

Specifically, the all-share index (ASI), an indicator used to measure the performance of listed firms on the exchange crossed 60,000 mark to hit a 16-year high for the first time since 2008, to close at 60,108.86 on Tuesday, June 27, 2023, from 51,251.06 at which it opened for the year on Tuesday, January 3, representing an increase of 8,857.8 points or 15 per cent.

Market capitalisation of listed equities which opened the year at N27,915 trillion, closed on Tuesday, June 27 at N32,729 trillion representing N5 trillion or 15 per cent appreciation.

However, the primary market segment of the Nigerian capital market had remained inactive in the last eight years, leading to apathy as most companies now resort to alternative means of raising capital, especially through bonds and Commercial Papers (CPs), a development which has become a source of worry to operators.

At the NGX Group’s 62nd yearly general meeting held in Lagos at the weekend, Group Chairman, NGX Group, Alhaji Umaru Kwairanga, expressed optimism that the planned IPO of the NNPC Limited would be fast-tracked by the Tinubu-led administration.

Kwairanga also assured that the group is open to working with the Federal government, as well as stakeholders towards improving the country’s credit profile and creating a favorable environment for both domestic and foreign investors.

Reacting on the issue, Chief Executive Officer of Wyoming Capital and Partners, Tajudeen Olayinka, said the boom period was policy-driven, noting that lack of market-friendly policies from the government and the Central Bank of Nigeria (CBN) has continued to make the market unattractive to the investing public.

“The cost of capital currently is lower due to the rally in the secondary market, it is an opportunity for public companies and issuers to approach the market to raise money for new issues and IPOs.

“Indeed, the rebound in the primary market would ignite the economy more than it will do to the market, and I think that is the direction we should be heading to with the return of the secondary market,” he said.

Vice President of Highcap Securities, David Adonri, said the market trade volume has improved significantly, especially since the beginning of last month driven by increased participation by local investors.

He pointed out that the boom in the secondary market now can be translated into revival of public offerings and capital formation noting that public offerings propelled the market growth during the last boom.

He also stated that primary market resurgence would also stimulate the activities of the stockbroking firms and boost their operations.

“The past years have seen dwindling patronage by retail investors due to the loss of their purchasing power. Rising inflation has also increased the cost of doing stockbroking business as most of the forms are currently struggling to survive.”

Adonri added that in a boom period, stockbroking firms generate commissions and fees from public offerings which will double their income when added to secondary market transaction commission to keep their businesses afloat.

Head of Equity, Planet Capital, Paul Uzum said: “To increase market turnover and reactivate the IPO market, the government has done apart with a libralised exchange rate, we expect to see more from the government in terms of fiscal discipline, and prudent management of state resources.

“That is a major factor that will enhance the stability of the exchange rate which is what foreign investors are looking for. Investors and issuers are waiting to see stable exchange rate, accelerated real GDP growth, improved performance of listed companies to approach the equities market for capital.”

Indeed, there has been a call for multinationals in the telecoms, and oil and gas companies to list on the nation’s bourse to deepen the market and encourage active participation of indigenous consumers in the companies’ wealth creation process.