Equities trading on the floor of the Nigerian Stock Exchange (NSE) finished the year 2016 with a loss of N604 billion. This is despite the fact that the last three days of the year witnessed bullish rally on the local bourse with a gain of N133 billion.
Most stakeholders attributed the prolonged lull in the equities market and economy in general to tight macro-economic policies, falling crude oil prices, which thwarted stakeholders’ expectations and led to the exit of foreign investors.
Available statistics showed that the activities on the NSE, which opened the trading year high at N9.850 trillion in market capitalisation and 28.642.25 in index at the beginning of trading on January 4, 2016, closed the year on December 30, 2016 at N9.246 trillion and 26,874.62 index points, hence has earned a year to date loss of about N604 billion or 6.17 per cent year to date. Save for the upswing witnessed during the second quarter of the year, the first quarter, third and fourth quarters ended on an unfavourable note.
This is notwithstanding series of strategies including tighter regulatory frameworks and reforms in the nation’s economy and the capital market which saw deregulation of the downstream sector and flexible exchange policy, conclusion of the recapitalisation process for capital market operators, commencement of nationwide e-dividend awareness and enforcement of new rules on illegal sale of shares, among others.
Some market watchers had hoped that these series of strategies initiated by regulators would help sustain the market on the path of recovery.
However, investors were wary of the outlook for Nigeria, Africa’s largest economy and the world’s number four oil producer. While assessing the current state of the market, some operators blamed the trend on the state of political, economic and financial situations in the country.
The Chief Finance & Strategy Officer of Wema Bank Plc., Mr. Tunde Mabawonku told New Telegraph that the apathy being shown by both foreign and local investors in the capital market was not unrelated to the systemic challenge facing the economy.
He noted that the lack of economic policy direction has fuelled uncertainty in the market, which, according to him, has made it difficult to attract and retain investors despite the opportunities that abound.
“The biggest factors affecting investors remain lack of clarity with regards to policy direction, lower oil revenue and the unresolved foreign exchange challenges affecting the nation. Investors do not thrive with uncertainty and the recessionary environment is exacerbating that sentiment. Clarity of policy and government action will help resolve the situation,” he said.
According to the President of Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, capital market was having its share of economic blues and also going through challenging times.
He listed the major factors responsible for the challenges to include, adverse macro-economic scenario, low level of capital literacy and retreat of foreign portfolio investors due to the hitherto adverse fixed foreign exchange change regime.
The Chief Executive Officer, Espera Global Corporation, Glenn Prince- Abbi, said that the market downturn was due to the low crude oil price, which gave the naira a battering among international currencies in 2016.
He said the anti-corruption war and the Niger Delta militants’ massive destruction of crude oil pipelines contributed to the development in the market.
The financial expert explained that the incidents created a massive shortfall in the country’s planned crude oil production output and export earnings and a fall in the nation’s currency.
“Well-developed and sophisticated capital markets can generate an infinite mix of economic benefits, spanning job creation, productivity growth and improved macroeconomic stability.
“This is what we need at this stage in Nigeria’s economic situation and this is why we need to take firm and measured steps in 2017,” he said. According to Prince Abbi, events in the last couple of weeks show substantial improvements to make one anticipate brighter prospects in the market.