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Stories by Chukwuma Umeorah
As Nigeria celebrates its 63rd Independence Day, growth across various sectors especially, the capital market, has been by leaps and bound. amid challenges.
For most stakeholders there is a lot to celebrate even as many believe there are some pains especially considering the current situation of the economy as citizens are not entirely happy with the policies of the present administration.
Some of the current policies including the removal of subsidies and exchange unification, at first, appeared to galvanise the growth of the economy but three months after President Bola Tinubu’s inaugural speech, indices of the economy have all headed south , leaving the citizens in quandry.
In the nation’s capital market, the evidences are so glaring for all observers to see that all is still not well for the country. So far it has been mixed sentiments at the trading floor.
However, looking back at the journey of the market in 63 years, the role of regulators, Securities and Exchange Commission (SEC) and Nigerian Exchange Limited (NGX) have always been the focus of assessment for most observers.
The NGX, for instance in tracing its roots to the establishment of the Lagos Stock Exchange on September 15, 1960, proudly holds the tag of being the oldest functional stock exchange in West Africa. Its formation was made possible through the dedication of seven initial subscribers to its Memorandum of Association, including notable individuals and organisations like R.S.V. Scott, Chief Theophilus Adebayo Doherty, John Holt Ltd, Investment Company of Nig. Ltd. (ICON), Sir Odumegwu Ojukwu, Chief Akintola Williams, and Alhaji Shehu Bukar.
Official operations commenced on August 25, 1961, with the listing of 19 securities for trading. However, informal trading activities had already begun in June 1961 with four firms serving as market dealers: Inlaks, John Holt, C.T. Bowring, and ICON (Investment Company of Nigeria). The trading volume for August 1961 amounted to approximately 80,500 pounds, and this figure surged to about 250,000 pounds in September of the same year, primarily driven by investments in government securities.
In December 1977, it was renamed The Nigerian Stock Exchange, and in 2021, it unveiled a fresh brand identity as the Nigerian Exchange Group (NGX), marking a significant milestone in its history. This transformation was spurred by its demutualisation and the subsequent formation of the non-operating holding company known as NGX Group Plc with subsidiaries likeNigerian Exchange Limited (NGX) which is the operating exchange, NGX Regulation Limited (NGX REGCO), the independent securities regulator, and NGX Real Estate Limited (NGX RELCO), the real estate company.
This change was aimed at enhancing market transparency, attracting investments, and promoting sustainable economic development signaling its commitment to meeting the evolving needs of Nigeria’s economy.
The exchange has now become a veritable window through which the global business community sees the Nigerian economy and a platform for investment capital inflows.
With deliberate reforms and collaborative efforts from various stakeholders throughout its evolution, the NGX has transformed into a globally competitive entity. It now boasts a robust legal framework, advanced trading systems, efficient clearing and settlement processes, an extensive list of listed companies and securities, strengthened corporate governance standards, and the widespread use of Information and Communication Technology (ICT).
Moreover, the interaction between the market and investors has significantly improved transparency through modern trading regulations and methods. Traditional practices like open-outcry and trader market muscle memory have given way to contemporary tools such as keyboards, monitors, charts, research reports, Fibonacci algorithms, candlestick patterns, and corporate engagement, all contributing to a more enlightened and accessible market environment.
Serving as a barometer of the nation’s economic health, the NGX has fared relatively well with the All-Share Index at 66,382. 14 basis points and a market capitalization of N36.35 trillion as at Friday’s (Sept 29, 2023) closing session. Also, the exchange emerged the second best-performing exchange in Africa during a three-month period consisting of June, July and August 2023.
According to African Markets, a website tracking the performance of exchanges in Africa, Ghana Stock Exchange (+22.84 per cent) emerged first while NGX (+19.33per cent) emerged second on the list, followed by Malawi Stock Exchange (+15.79per cent).
But the journey had not been all rosy, particularly, the past year which presented formidable challenges for the NGX.
A weak macroeconomic environment coupled with inflation soaring to 25.8 per cent has dampened investor confidence as some market operators have emphasized that a generally weak business environment threatens investment potentials.
Additionally, the unification of the exchange rate, with the value of the Naira at N1000 to a dollar, brought so much uncertainty and volatility into the market. The audacious policy reforms and actions by the new government, including the suspension of the former Central Bank Governor and the appointment of new leadership, added to the market’s complexity.
Though some analysts have said that the growth was weak given the immense potential that lies within and when compared with its peers, the global macroeconomic landscape also has been volatile, leading to fluctuations in stock prices and affecting investor sentiment.
Moreover, there are still concerns about corporate governance practices in some listed companies that have raised questions about the overall integrity and reliability of the market.
However, there are ongoing conscious efforts by stakeholders and the regulatory authorities to address challenges and improve the overall performance of the market.
For instance, the Director-General, SEC, Lamido Yuguda, whilst stating the Nigerian capital market has grown amid challenges, believes that the Nigerian capital market, being an organised and specialised financial market that drives capital mobilisation through domestic savings and foreign capital inflows, is well positioned for the realisation of the infrastructure objectives of the nation.
Yuguda assured that the Commission is committed to protecting investors and creating an enabling market, emphasising its unwavering resolve to build a robust capital market that is instrumental to driving economic progress in the country.
For his part, the Chief Executive Officer of NGX, Temi Popoola, stressed that the exchange remained committed to assisting investors and businesses achieve their financial goals.
“NGX aims to be Africa’s preferred listing partner by covering all sectors and working on policy reforms to support listings and the capital market as a whole. It has played a significant role in major listings like the Sukuk bond and FGN Bonds, contributing to Nigeria’s economic growth. Additionally, NGX is committed to promoting financial inclusivity and diversity in retail participation, as seen in the MTN IPO in December 2021, among others”, he said.
However, market operators who spoke to Daily Sun urged government and the regulators to take more proactive actions to improve the competitiveness of the market to unlock its full potential. In his reaction, the Chief Executive Officer, Crane Securities, Mike Eze, noted that the market has fared relatively well despite several ups and downs, losses and gains. He noted that foreign investors are still cautious, but have continued to engage with the market adding that increased advocacy efforts have also encouraged small investors to return to the market.
Eze alluded to the fact that the capital market reacts directly to government policies and urged the Federal Government to prioritise its well-being.
His words, “The government needs to realise that the capital market is the engine room of the economy and harness its benefits. Whatever hiccups there are in the system, the market could fix it. It is good that the current government has an idea of what the market can do for the economy. A lot of appointments have been made and they have reached out to the market.
The recently appointed Central Bank Governor, Yemi Cardoso and the Minister of Finance and Coordinating Minister for the Economy, Wale Edun have strong backgrounds in stockbroking, and with them, we know that the market is going to be active.
Looking forward, the government should promulgate market-friendly policies to boost investments and create an enabling environment for businesses. There is need to review tax policies to eliminate double taxation and government officials should prioritize economic governance alongside political governance”
For his part, MD of APT Securities, Kurfi Garba, noted that the Nigerian capital market faces challenges akin to those in other emerging markets. He advised that to encourage more private companies to list, the government must create attractive incentives, currently lacking in the ecosystem. Providing tax relief for listed companies and motivate more businesses to go public.
“In addition, the government should prioritise and support public listed companies even going as far as assisting independent private companies in transitioning to the stock exchange. This transformation ensures the longevity of these businesses beyond their founders and fosters economic development driven by Nigerians themselves.”
Garba further underscored the pivotal role of the government in nurturing a conducive macroeconomic environment for business growth. While acknowledging the government’s positive intentions, he believes that the implementation of policies like naira unification and fuel subsidy removal fell short due to inadequate assessment. “The government has to take a more practical approach backed up by empirical study to improve the macroeconomic environment for businesses to thrive.
This new government have good intentions with the policies that they have rolled out like the unification of the naira, removal of fuel subsidy among other, but I believe that it was badly implemented, and the appropriate assessment of the challenges was not carried out. They need to go back to the drawing board, review and make the necessary amendments to move forward,” he urged.
