7 January 2013

Nigeria: Stock Market Operators Forecast Further Growth

Though 2012 has been adjudged the best of times for investors in the nation's stock market since the financial meltdown began in 2008, some operators in the market have expressed hope that this year will be better going by some reforms currently on to shore up confidence and restore the market to its past glory as bastion of the economy.

It is expected that gains from the reforms will be much visible in 2013, just as this will translate to growth and development of the securities market.

The operators said the reform which was majorly geared towards repositioning the Exchange for profitability as well as returning investors' confidence in the face of the global financial crisis noted that the equities market would be more stable in the year in view.

Market operators however, insisted that except single digit inflation and interest rate is achieved, growth in the market may be hindered.

They maintain that the recovery of the Secondary Market for equities in the year did not translate to reactivation of the Primary market, hence the need for a holistic approach to growth of the market in the New Year.

The Managing Director of Lambeth Trust and Investment, Mr. David Adonri, said while the Nigerian Equities Market appreciated by over 35 per cent in 2012 and being one of the best performing markets in the world, recovery of the Secondary Market for Equities did not however translate to reactivation of the Primary Market. While the Primary Market for Bonds was very active, the world class Secondary Market bonds platform of The NSE remained dormant.

He stated that if macroeconomic projections for 2013 of single digit Inflation and Interest rates materialise, stability of the Equities Market will be assured.

He noted that there is need to deepen the capital market with reactivation of the NSE bond platform, listing of privatised State enterprises and expansion of the Derivatives Market "is essential for preventing bubble formation in the Equities Market. This is the challenge that confronts the capital market in 2013."

With the full recovery of the Banking sector, it may still occupy the commanding height of the Equities Market in 2013. Other sectors with growth potentials include Agriculture, Food & Beverages and Insurance.

He explained that for further stability of the market, the government must reduce its borrowings in the New Year so as to ensure movement of funds to the real sector and the equities.

He stressed the need for the stability of macro-economic policies, infrastructural development and sustenance of reform initiatives to ensure economic growth.

The President Association of Stockbroking Houses of Nigeria (ASHN), Mr. Emeka Madubuike, said that the market would continue on its recovery path if some of the initiatives already implemented to boost investors' confidence are sustained.

Madubuike said that the initiatives included the introduction of the market makers and the prompt submission of the quarterly reports by listed companies. He said that the resolution of operators' debts with the release of N22.6 billion forbearance package by the Federal Government would free funds for investment.

Managing Director, APT Securities and funds ltd, Malam Garba Kurfi said that early passage of the budget unlike in the past showed government's seriousness about economic growth. According to him, the federal government's decision to invest some portion of the Sovereign Wealth Fund (SWF) would deepen the market. Kurfi said that the cancellation of the Value Added Tax (vAT) and the stamp duty on transactions in the market would increase participation.

In his contribution, the Managing Director Crane Securities, Mr. Mike Eze, said this is going to be a good year for the capital market in Nigeria in the sense that the market has successfully gone through the normal lull cycle which markets usually undergo when there is a crash, "And so what we are going to witness is a steady rise in market activity, a potential rise in both the index and the market capitalisation respectively. We are all going to witness an astronomical increase in return on investment with a corresponding increase in Per Earning Ratio across almost all sectors of listed equities in the market', he added.

The Director-General, Securities and Exchange Commission (SEC),Ms Arunma Oteh, said recently that the reforms in various sectors of the economy would help to revamp the capital market in 2013.

She said that the commission was following the reforms in the power sector closely and monitoring how it would effectively and efficiently boost the stock market.

According to her, SEC is monitoring the reforms to ensure that the privatized companies are listed on the Nigerian Stock Exchange.

Oteh said that the commission was working tirelessly to ensure listing of upstream, downstream, telecommunication companies on the Exchange.

She said that the nation's bourse had been recognised internationally as the world most performing capital market.

Oteh said that the capital market had recorded over 30 per cent year-to-date growth and the best any market could offer in the world.

According to her, it is now known that without a world class market, Nigeria cannot solve its infrastructure problems and transition in agricultural sector.

"The capital market is not driven by euphoria, but by fundamentals of different sectors of the economy represented on the Exchange, "she said.

Alhaji Gbadebo Olatokunbo, a member of the Nigeria Shareholders Solidarity Association, said that investors were gradually returning to the market due to improved dividends and bonuses.

Olatokunbo said that quite a number of companies had started paying dividends unlike in the past when quoted firms posted losses.

"Investors are beginning to see that there is light at the end of the tunnel after losing billions of naira in the market," he said.

Olatokunbo, however, called on the Federal Government to pay more attention to the market, stressing that the market should be devoid of politics to retain investor confidence.

Mr Boniface Okezie, the President of Progressive Shareholders Association of Nigeria (PSAN), attributed the recent growth of the market to change in leadership at the Securities and Exchange Commission (SEC).

Okezie said that various initiatives and interaction between the management of SEC and stakeholders might have restored investor confidence.

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