Daily Independent (Lagos)
Kingsley Ighomwenghian
13 January 2009
It was time once more on Monday, January 12 for the annual review of previous year's activities in the economy and market by the Director-General of the Nigerian Stock Exchange (NSE), Prof. Ndi Okereke-Onyiuke.
She admitted that while the economy performed below government's projection, the stock market indicators lost a huge chunk of all gained in 2007 in terms of growth in market capitalisation and All-Share-Index. When compared with what has happened within the same period in the developed markets, she submitted: "We didn't do badly at all, compared to other markets."
According to the breakdown of statistical performance in the just- concluded year, presented by Okereke-Onyiuke, the market's cumulative value (different from equities' value) lost some N3.735 trillion or 28.09 per cent from N13.295 trillion closing figure at the end of 2007 to last year's N9.56 billion while the index fell by 26.539.44 basis points or 45.76 per cent to 31,450.78 points from the 57,990.22 points in the corresponding period of 2007.
The trading floors of the exchange, she continued, were, however, more active, as stockbrokers crossed a total of 193.14 billion shares of the listed companies for N2.4 trillion, as against the 138.1 billion units exchange a year earlier for N2.1 trillion. Volume and value of transaction for the period improved by 39.85 per cent and 14.3 per cent, just as average daily volume of transaction stood at 775.65 million, a 35.94 per cent rise from previous year's 570.6 million while value recorded a daily average of N9.55 billion, up from N8.62 billion, an improvement of about 10.8 per cent.
The bulk of activities, as usual was in the equities' market, accounting for N2.376 trillion or 99.85 per cent of total turnover while trading in the industrial bonds sector pooled N3.53 billion or 0.15 per cent, as against N2.87 billion or 0.14 per cent in 2007. Within the period also, the over-the-counter trading in Federal Government bonds on the exchange, where several investors took solace as the meltdown intensified, recorded a turnover of N10.44 trillion in 78,248 deals, compared with just N4.13 trillion in 30,182 deals in 2007.
The NSE wants government's Debt Management Office (DMO) for the purpose of transparency and pricing efficiency to consider migrating trading on the OTC to its trading platform since it has the technology to deliver.
A further analysis of the year's closing figures, she said showed that turnover value for the year represented 10.4 per cent of Nigeria's Gross Domestic Products (GDP), representing 14.04 per cent on the N2.1 trillion (9.1 per cent of GDP) recorded in 2007.
The DG, however, remained grateful that unlike the situation globally, most of the companies whose shares are traded on the exchange were fundamentally sound and continue to record profit from which they distribute cash and scrip dividend. This, in her words, is "because we are patronising their goods and services, so the market is bound to rebound."
Her words: "We thank God that our market did not meltdown as much as many of the advanced stock markets. "We thank God that the (whirl) wind did not blow too hard on our side, at a time when several global giants closed shop."
This was unlike the situation in the U.S. and across Europe and Asia where several once celebrated financial warhorses either paled into insignificance or got consumed entirely, leading to the loss of an estimated $14 trillion by the global stock marketing 2008. The turmoil in the U.S. market, which began with the sub-prime mortgage crisis in 2007 climaxed in September last year with the collapse of major financial institutions like Lehman Brothers and Merrill Lynch, two of Wall Streets biggest investment banks. Lehman Brothers filed for bankruptcy while Merrill Lynch was later snatched from the jaw of death by Bank of America for about $33 billion in stock. The U.S. government, however, moved fast to prevent the collapse of global underwriting giant - American International Group (AIG).
"Consequently, upon the turmoil in the financial system and the worst global recession, equity prices crashed in most exchanges such that the global stock mark gains of previous years were wiped out. The fear of big plunge led to the closure of some stock exchanges for days.
The meltdown, according to her, would have been less severe, but for the activities of some company executives that flooded the capital market with all kinds of private placement memorandum that were done like normal public offerings. Analysts put the amount invested by the public in various private placement before the end of last year at over N300 billion. Unfortunately, while some admitted that they have not filed an application for listing with the NSE others were accused of deceiving the public that they would list the shares at the conclusion of such offerings. Expectations were that the companies would come for listing within a short time, a situation which appears now to be only a pipe dream, as the DG disclosed during her annual media briefing on Monday that some of those affected have so far appeared before the NSE Quotations Committee for as many as four or even five times without being able to meet the requirement or convincing the members on why their company should be admitted for listing.
Aside from the huge funds locked up in the private placement with investors unable to trade their shares, she also blamed the intensity of the meltdown on the fact that many investors - especially middle level managers desirous of owning a home sold their shares to invest in the mortgage sector.
Despite the meltdown and contrary to the gloom painted by some market analysts, Okereke-Onyiuke and her team at the exchange are optimistic "that the Nigerian market will rebound in the not too distant future, considering the most recent resurgence of activities by the bulls whose activities are translating into improved liquidity in our market and renewed, howbeit gentle confidence build up."
Expectations, she believes, are high that 2009 would remain busy with the conclusion of several private placements started in 2008, aside from hopes that the Bureau of Public Enterprises (BPE) would bring shares of the Nigerian National Petroleum Corporation (NNPC), NITEL and Power Holding Company of Nigeria for listing. The market, she quipped, has enough capacity to absorb these and other issues.
CSCS Cleared, Settled 450b Since 1997
The annual media parley was also an opportunity for Chief Executive of Central Securities Clearing System Limited, Onyewuchi Asinobi, the NSE clearing house, to review his organisation's performance in 2008.
In his words, the organisation cleared and settled transaction volume of about 191.5 billion shares worth N2.3 billion, as against 138.1 billion valued at about N2.0 billion in 2007, indicating an increase of 15 and 39 per cent respectively.
In all, according to him, in the 11 years between 1997 when the CSCS Limited started operation and last year, it has cleared and settled a total of 450 billion shares while the records reveal the presence of over 4.3 million shareholders as against over 2.0 million in 2007, representing an increase of about 115 per cent.
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