NSE DG, Oscar Onyema
By Goddy Egene
The Nigerian stock market is inching towards its 2008 peak on N12.62 trillion having made a recovery of 83 per cent by the close of trading last Friday, investigations by THISDAY have shown.
Following the banking consolidation exercise in 2005, the equities market rode on the back of an unprecedented bull run which peaked at a market capitalisation of N12.62 trillion in March 2008.
However, it went into a steep decline that same month following the contagion from the global financial crisis as well as the local banking crisis, which combined to wipe out half of the market’s value to a low of N6.27 trillion in November of 2011.
As banking sector stocks lost more than half of their value, the stock market floundered between 2009 and 2011 until the reforms initiated by the Central Bank of Nigeria (CBN) and Asset Management Corporation of Nigeria (AMCON), which bought up the non-performing loans from the balance sheets of the banks, started to yield fruit.
In 2012, foreign and institutional investors started to regain confidence in the market and began to take positions, resulting in a growth of 34.5 per cent by December ending.
The market’s rebound continued into 2013, with the stock market capitalisation inching to N10.55 trillion last Friday, translating to a recovery of about 83 per cent of its 2008 peak.
Also, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) closed at 32,993.97 last Friday, compared to 21,388.88 a year ago, while year-on-year (y-o-y) growth recorded by the market stood at 54 per cent. Similarly, market capitalisation on a y-o-y basis has risen from N6.82 trillion to N10.55 trillion.
Year-to-date, the market has recorded a growth of about 18.8 per cent. However, y-o-y growth had peaked at 62 per cent early this year before profit-taking by investors depressed stock prices.
Despite the challenges of liquidity, the Nigerian bourse was among the best performing markets in 2012 and in the first quarter of 2013.
Having closed as the third best performing emerging market globally with a growth of 34.5 per cent in 2012, the Nigerian stock market also posted a growth of 13.4 per cent to occupy the first position Africa in January 2013.
Kenya, which had posted the best growth last year, placed second at 8.3 per cent. Mauritius returned 4.1 per cent, while South Africa and Egypt ended the month with 2.8 per cent and 2.6 per cent respectively.
Market analysts have attributed the rebound in the Nigerian market to the impact of reforms implemented by regulators and impressive results of companies.
For instance, the Securities and Exchange Commission (SEC) and the NSE have improved in the area of enforcement of compliance to market rules.
Also, the far-reaching banking sector reforms initiated by the CBN and the activities of AMCON have been credited for the market’s performance.
Besides, the market has responded to the 2012 full-year results of many of the listed companies, beginning with the banks.
In the build-up to the start of the release of the results, prices rose significantly as investors took positions in anticipation of better than expected results. But the market retreated shortly afterwards due to profit-taking and the negative response by investors to non-declaration of dividends by some quoted firms in spite of the profits they posted.
Irrespective, the market ended the first quarter of 2013 with a growth of some 19 per cent, which has raised hopes of positive returns at the end of current year.
In addition, with the restoration of confidence in the market, thousands of local retail investors who fled the market in 2008-9, have started to return while foreign portfolio investors and companies continue to increase their stake in equities as returns from the Nigerian bourse have proved to be more attractive than mature markets in Europe, America and parts of Asia.