The outbreak and spread of the coronavirus (COVID-19) has severely impacted the world economy with many industries suffering including the financial markets. The impact of the novel virus was so pervasive and destabilising that the World Health Organisation quickly declared COVID-19 a pandemic. The health, social and economic effects of the virus continue to be felt given the rise in the number of cases and deaths, with many companies frantically deploying survival strategies or throwing in the towel by way of filing for bankruptcy.
In global markets, the pandemic has inflicted record losses in numerous markets including advanced securities exchanges that one would expect minimal impact given the sophistication and financial muscles of such markets. Various exchanges in Asia, where the virus was first reported in December 2019, have experienced varying losses recorded by leading markets like Shanghai Stock Exchange Composite Index, Nikkei Stock Average Index. Europe has been not spared in the sweeping spread of COVID-19.
Market Performance in Africa
At the second stakeholder engagement session held virtually on May 27, 2020, the CEO of The Nigerian Stock Exchange, Mr. Oscar Onyema, revealed that despite the impact of COVID-19 on the African market, the NSE has been able to withstand the shock. According to him “Supported by recovering oil prices, resumption of economic activities and attractive valuations, the NSE ASI has rallied since April. The NSE ASI has returned -6.1per cent YTD while JSE/FTSE ASI stands at -13.1per cent; Nairobi ASI at -15.6per cent; BRVM Composite at -17.5per cent; and EGX 30 at -27.6per cent.
The Nigerian Capital Market remains very attractive in terms of dividend yields and market valuation ratios”. The trading numbers obtained from the NSE showed that market transactions have been driven by domestic investors accounting for 59per cent of the equity value traded. This represents a significant shift from the previous 4-year average of 51per cent from 2016 to 2018.
Foreign investor participation has dropped to 41per cent from an average of 49per cent of transactions. Looking at the sectorial performance, on one hand, the financial services sector has dominated the trading turnover at 63per cent of transactions with the consumer goods sector at 14per cent; Industrial goods at 9per cent; ICT at 7per cent; Oil and Gas at 4per cent.
While on the other hand, the NSE Industrial Goods is the best performing sector in terms of returns at 8.66per cent YTD with the NSE Banking Index recording -15.5per cent; the NSE Insurance at 0.99per cent; the NSE Oil & Gas Index at -12.74per cent; and the Consumer Goods at -29per cent. Other asset classes have also enjoyed positive sentiments from investors. Mr. Onyema reported that the market capitalisation in the fixed income space has risen by 8.91per cent to N14.02trillion ($36.32billion) from N12.92trillion ($35.44billion) as at the end of 2019. This can be attributed to significant debt capital raising from the Federal Government of Nigeria (FGN), in a bid to finance fiscal and infrastructure deficits. The Exchange on its part continues to sustain investment operations in the face of the pandemic by supporting companies in raising capital from the market. The ETF market has, however, seen mixed sentiments from investors owing to activities in the equities market. Of the ten listed ETFs, The Exchange reports significant returns in the New Gold ETF with a 48.94per cent return YTD and the VETIVA S&P NIGERIA SOVEREIGN BOND ETF with 16.28per cent return YTD. Looking ahead, The Exchange is actively engaging ETFs issuers both foreign and domestic to have more diverse ETFs that offer exposure to other commodities and geographies.
Surviving the Pandemic: The NSE Way
Reports over the past several weeks have shown that the NSE has been reaping the rewards of steady and consistent capacity building in business innovation, technology, automation and digitisation of its operations. The resilience that the Nigerian bourse has shown in these trying times is indeed noteworthy. Since the activation of its Business Continuity Plan on Monday, 23 March 2020, employees of The Exchange have been working remotely effective Tuesday, 24 March 2020, while Dealing Member Firms have been trading remotely and seamlessly since Wednesday, 25 March 2020. The Exchange has continued to maintain trading activities during normal trading hours and has witnessed no disruptions to its activities. Rather, it has continued to actively pursue avenues to deepen the capital market, actively engage stakeholders and widen the pool of investment instruments for investors with new listings and capacity building exercises. These efforts have culminated in some impressive innovations that have been integrated as business as usual at The Exchange.
For instance, the traditional Closing Gong ceremony has been successfully transitioned into a digital experience with the likes of Sterling Bank and FBNQuest Merchant Bank being two of the privileged guests. The Exchange also continues to host quarterly meetings and virtual sessions under the auspices of its Stakeholder Engagement Series; as well as provide guidance to the capital market ecosystem to properly navigate this new terrain. By way of deepening capital market activity, the NSE has listed fresh capital raised by quoted companies and the federal government to the tune of N202.989 billion in the first five months of the year, 2020. Some notable listings in the private sector include the FBNQuest Merchant N5 billion bond; the Primero BRT Securitisation SPV Plc’s N16.5 billion bond; the Flour Mills of Nigeria’s N7.5 billion and N12.5 billion bonds; Golden Guinea Breweries Plc’s Private Placement amounting to N1.2 billion. On the government side, the FGN Savings Bonds valued at N206.307 million, 5.131 per cent and N78.672 million of 4.131 per cent on April 3, 2020, were listed, as well as the Federal Government Bonds of N55 billion, N65 billion and N40 billion. Responsible corporate citizenship has not been left out. Recently, The Exchange announced its N100 Million donation to the fight against COVID-19 with N60 Million donated to the Capital Market Support Committee for COVID-19 (CMSCC) and N40 Million to implement the Masks for All Nigerians Campaign.
The CMSCC is the SEC-led initiative designed to galvanise capital market players to join the fight against the coronavirus, while the Masks for All Nigerians Campaign is geared towards the distribution of over 400 million face masks to Nigerians and running an enlightenment program on the safe use of masks on traditional and social media.
The Exchange will be making an anchor donation of over 100,000 face masks whilst galvanizing its ecosystem to partner in delivering the balance. Ultimately, NSE has made significant progress in building a digital ecosystem that is serving stakeholders excellently in these unprecedented times. Without the foresight of the NSE and the dogged implementation of several strategic initiatives, the Nigerian capital market would have suffered major disruptions with local and global stakeholders incurring major losses.
Rather, the market continues to enjoy seamless operations with continuous trading, frequent stakeholder engagement, market deepening activities, and all other functions fully activated. The Exchange has, therefore, earned its spot as a globally acclaimed top-performing securities exchange with quality listings and several landmark achievements. Having successfully provided a vehicle for long-term ‘saving’ and ‘borrowing’ and hence, efficient use of financial resources, all indications suggest that the capital market will become even more vibrant and experience strong investor confidence.