The Nigerian equities market has lost N1.766 trillion in 10 months from January to October 2018 and is heading to a negative close contrary to expectations that the gain recorded in 2017 would be sustained this year.
After negative closure in 2014, 2015 and 2016, the market recovered in 2017 with a record gain of 42.3 per cent with projections that the Bull Run would continue through 2018.
However, 10 months after and two months to end of the year, the market has lost N1.766 trillion in capitalisation, which fell from N13.619 trillion in January to close at N11.853 trillion yesterday, translating to 12.9 per cent loss.
The loss is even higher when viewed from the Nigerian Stock Exchange (NSE) All-Share Index (ASI), angle which has shed 15.1 per cent within the last 10 months. The NSE ASI declined from 38,243.19 to 32,466.27.
Although the market had opened 2018 with an unprecedented bull run that hit a peak at the end of January, the bears set in as from February following the exit of foreign investors to developed markets.
While many of the emerging and frontier markets were affected by the flight to safety by investors due to increase in rates in the United States, Nigerian case was compounded by sell down by some investors to guide against negative impact of the forthcoming general elections.
However, the decline moderated in the month of October, falling by a marginal 0.9 per cent compared with 5.9 per cent in September. Market analysts said investors’ reaction to third quarter corporate earnings helped to reduce the negative impact in October. But it is believed the market cannot recover in the remaining two months to close the year with a gain, considering the tension being created in the polity as elections approach.
Stockbrokers had said that whereas some investors have remained confident in the strong fundamentals of the market, such confidence has been challenged by developments in the political scene.
Based on the developments, which include defections and utterances capable of heating up the polity, the Association of Stockbroking Houses of Nigeria (ASHON), the umbrella body for the chief executive officers of stockbroking firms, said more investors were exiting the capital market.
ASHON said: “For the umpteenth time, we strongly appeal to the political class that rather than indulge in unwholesome activities, actions, attitudes and destructive utterances, they should support all efforts aimed at creating the much-needed enabling environment for accelerated economic growth and development.”
According to the association, the unguarded activities and unrestrained utterances of our politicians are heating up the polity with dire consequences on the economy as a whole and the capital market in particular.
“Perhaps we may remind the political class that uncertainties and all sorts of insecurities that currently pervade our country affect investors’ sentiments, asset valuations, market and country risk profile and portfolio allocation decisions. In recent times, trading statistics on the securities markets in Nigeria have been reflecting investors’ apathy to unprecedented level of tension that portends likely breakdown of law and order in the 2019 general elections.”
ASHON explained that it is an unassailable investor-behaviour that bad news trigger market panic and investors over react to such news, adding that innocent investors watch helplessly as their investments are plundered by the bearish market exacerbated by prevailing uncertainties in the polity created by the political class.
“As the country’s economic barometers, the securities markets in Nigeria have continued to reflect investors’ apprehensions to instability in the political and economic landscape through all their indices. This has largely accounted for the inability of our market to fully recover from the effects of the 2008 financial crisis , notwithstanding the efforts made by the regulators and operators to fully revive the market. There is clear and present danger if the trend continues,” it said.