The Nigerian Stock Exchange (NSE or The Exchange) All Share Index (ASI) recorded its largest daily gain in more than five years, surging by 4.9% on Tuesday, 6 October 2020. The 12-day rally saw equities market capitalization cross the N15 Trillion mark, bringing the Year-to-Date gain of the ASI to 7.7%.
The benchmark index soared 13% in the past month more than any of the other 93 major global gauges tracked by Bloomberg and has reclaimed the title of the best-performing market in the world, a position it held in February 2020. It has also been reported by Bloomberg that this is the longest winning streak the Nigerian bourse has recorded since July 2017
It is evident that investors are flocking to the stock market in search for positive yield given the low-interest-rate environment and negative real yield environment. It would be recalled that on 22 September 2020, following its Monetary Policy Committee (MPC) meeting, the Central Bank of Nigeria in a surprising move cut the Monetary Policy Rate (MPR) by 100 basis points from 12.5% to 11.5%. In the 10 days after the cut in MPR, the daily turnover has averaged N5.5Bn compared to N2.3Bn in the corresponding period before the cut in the MPR. The NSE ASI is also up 13% since the September MPC meeting.
Looking closely at the performance of the market, we see that investors are targeting Nigerian companies they expect will best overcome the onslaught of COVID-19 and be able to distribute dividends to shareholders. Companies like Dangote Cement, MTN Nigeria, Zenith Bank, United Bank for Africa, FBN Holdings, and Guaranty Trust Bank commonly classified as bellwethers have enjoyed significant activity based on their strong fundamentals. That is not to say that other segments of the market have been neglected. Performance across sectors has been truly impressive with the Banking, Industrial Goods, Consumer Goods, Oil & Gas and Insurance indices recording positive gains over time.
In terms of participation in the market, the total value of transactions executed by domestic Investors on The Nigerian Stock Exchange in the first eight months of the year stood at N731bn as against N470.20bn total foreign transactions carried out during the same period. This shows that domestic investors outperformed transactions executed by foreign investors by N260.8bn or 55.47 per cent. While retail investors have been active in the market, Pension Fund Administrators (PFAs) have been the most significant net buyers in the market as the monthly contributions from the fund contributors are being remitted. The return of domestic investors particularly PFAs into the market is remarkable and analysts agree that it can drive further flows or at least help sustain the gains.
The steadily rising interest in the equities market is also a clear sign of increasing investor confidence occasioned by the noteworthy activities of The Exchange, especially during this pandemic. NSE on its part has showcased its remarkable resilience by maintaining a thriving capital market even in the face of remote working and trading. In line with its commitment to provide an accessible platform for listing and trading activities, NSE has recorded listings in the market worth over N1.42 Trillion from 24 March to 24 September.
Furthermore, NSE has continued to implement on its commitment to improve market integrity, reduce market asymmetry and improve the flow of information into the market with the upgrade of several platforms. It would be recalled that The Exchange released an upgrade to its Data Portal, X-Data Portal; Issuers’ Platform, X-Issuer; and its whistleblowing portal, X-Whistle over the last few months.
The upgrade of the X-DataPortal is in line with the desire of the NSE to continue to provide an exchange that is easily accessible leveraging digital technology. Speaking in an interview, the Chief Executive Officer, NSE, Mr. Oscar N. Onyema, OON stated, “The newly enhanced X-DataPortal has been equipped with market-focused features that will complement the NSE website and other NSE portals in response to stakeholders’ increased demand for easy access to data. Given the importance of Market Data in investment decisions, we remain resolute in our commitment to provide capital market participants with more channels to access relevant market information required for making investment decisions.”
Also, The Exchange introduced its revamped X-Issuer to the market with new features that will enable easy, convenient and more reliable submission and dissemination of company information, corporate actions, directors’ and insiders’ share dealing information, financial statements, earnings forecasts, meeting notices, and much more. It is expected that the upgraded X-Issuer will further enhance the experience of issuers and expedite the discharge of post-listings obligations in a cost-effective and efficient manner.
The Exchange also prioritizes investor protection evidenced by the introduction of the upgraded X-Whistle. The Executive Director, Regulation Division, NSE, Ms. Tinuade Awe, noted, “The Exchange is pleased to introduce the upgraded X-Whistle to the market with robust features that will allow people with information about misconduct to come forward to report it and to provide all stakeholders with the means of expressing their concerns in a responsible and effective manner. In 2019 alone, the complaints, tips and referrals received have led to investors’ restitution in excess of N1.4 Billion. The X-Whistle will, therefore, further equip The Exchange with the tools required to properly assess reports, carry out the necessary investigations and resolve issues efficiently.”
The capital market ecosystem has clearly been reaping the rewards of steady and consistent capacity building in business innovation, technology, automation and digitisation of the NSE’s 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.
As the market continue to ride the wave of the equities market, it has also been reported that the introduction of Exchange Traded Derivatives (ETDs) in the Nigerian market is imminent. This is in light of the successful registration of NG Clearing by the Securities and Exchange Commission (SEC) as an elite fully functional Central Counterparty Clearing House (CCP) in Africa. The approval-in-principle will allow The Exchange to launch ETDs supported by NG Clearing in the risk management process. Set up by key players in the Nigerian financial industry including NSE, Central Securities Clearing System (CSCS) and top-tiered banks, NG Clearing will play a key role in the financial market ecosystem by driving the safety and stability of Africa’s global marketplace through efficient and timely settlement of derivative trades.