In 2016 Iinvestors lost N10trillion to Dollar-Naira crisis

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Investors in the Nigerian stock market lost about N10 trillion in 2016 when adjustments were made for foreign exchange, according to new comparative trading and valuation data provided by the Nigerian Stock Exchange (NSE).
The comparative Dollar-Naira data indicated that total market value of the Nigerian stock market dropped by about 37.8 per cent, equivalent to N9.83 trillion in 2016, when adjustments were made for the steep decline in foreign exchange (forex) during the year, providing the full glimpse of the losses suffered by investors during the year. A nominal Naira-based valuation had indicated that total market value of the Nigerian stock market dropped by N817 billion or 4.81 per cent in 2016.
The report showed that contrary to Naira-based valuation that showed that the Nigerian equities lost N604 billion or 6.17 per cent in 2016, forex-adjusted simple nominal return for equities was -38.6 per cent, equivalent to a net capital loss of N5.83 trillion at current exchange rate.
Total market capitalisation of the NSE, which included equities, bonds and exchange traded funds (ETFs), which opened 2016 at $85.295 billion, dropped to $53.068 billion by the end of the year, indicating a loss of $32.23 billion or N9.83 trillion at the current exchange rate of N305 to a Dollar.
Segmental analysis showed that aggregate market value of all quoted equities, which opened 2016 at $49.56 billion, closed the year at $30.35 billion, representing a loss of $19.11 billion or N5.83 trillion at current exchange rate.
Market value of bonds dropped from the year’s opening value of $35.82 billion to close at $22.71 billion, a decline of 36.6 per cent or $13.1 billion, equivalent to a loss of about N4 trillion. The market value of ETFs also depreciated by 21.95 per cent from the year’s opening value of $20.16 million to $15.73 million, a decline of $4.43 million or N1.35 billion.
Foreign portfolio investors hold significant influence in the Nigerian stock market, where they control some half of the transactions. Several Nigerian investors also access Dollar-denominated funds to invest in the market. The movement in foreign portfolio investments (FPIs) has been known to correlate with the pricing trend and overall performance at the Nigerian stock market.
The 12-month report also highlighted considerable slowdown in activities at the Nigerian capital market, in both Naira and Dollar terms. The primary market was almost inactive, underlining the challenge of capital raising faced by quoted companies as investors’ apathy gripped the market.
While total turnover volume of equities traded rose marginally by 3.15 per cent, the value of equities’ transactions dropped by 60.51 per cent from $4.78 billion in 2015 to $1.89 billion in 2016. There were only two new equity issues each in 2015 and 2016, but the value of the new issues dropped by 88.1 per cent from $388.71 million in 2015 to $46.1 million in 2016. Supplementary equity issues also dropped from $2.15 billion in 2015 to $127.92 million in 2016, representing a drop of 94.1 per cent. Value of new bond issues declined by 14.3 per cent from $5.01 billion in 2015 to $4.30 billion in 2016.
With the delisting of some companies, number of listed companies at the stock market dropped from 184 companies in 2015 to 170 companies in 2016. Also, the number of listed equities declined from 190 equities to 175 equities. Total number of listed securities at the stock market dropped from 257 securities in 2015 to 247 securities in 2016. The number of listed bonds had increased from 60 bonds to 64 bonds while the number of exchange traded products increased modestly from seven to eight.
Chief executive officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, told stakeholders that the forex will remain a decisive issue for the performance of the Nigerian stock market in 2017.
“We expect investors to continue to keep a close eye on the divergence between the interbank forex rate and other exchange rates in the country. Accordingly, a convergence of forex rates in the country and the performance of listed corporates will determine the level of market activity in the short term,” Onyema said.
He noted that with forecasts for inflation expected to moderate due to the base effect, the monetary authorities will have more flexibility with respect to interest rates and foreign exchange regime, hence good coordination between fiscal and monetary policy should result in resolution of structural deficiencies and drive economic growth.
Onyema, however, expressed optimism that the Nigerian market may rebound in 2017 given expectations that the economy will perform better and grow in the new business year.
According to him, the Nigerian economy is expected to recover from its recession in 2017 with a modest Gross Domestic Products (GDP) growth forecast of 0.6 per cent, though this will depend largely on the vigour of fiscal policy implementation, lower rates of disruptions to oil infrastructure from resolution of the Niger Delta conflict, crude oil prices remaining above the government’s benchmark of $42.5 per barrel, improvement in ease of doing business and other policies aimed at boosting economic productivity.
He outlined that the Exchange intends to strengthen its thought leadership efforts with policy makers to drive policies that will free up the system and promote the ease of doing business in Nigeria pointing out that incentive schemes for sectors of the economy that can support a pivot to export-led economy and systematic removal of impediments to doing business and reduction of leakages will attract private sector investments.
“Cognisant of the ever evolving economic realities on ground, the NSE will take an adaptive approach to strategy execution in 2017. In the immediate future, the NSE will focus on achieving its goal of becoming a more agile and demutualised exchange and will fast track efforts towards developing innovative products such as exchange traded derivatives to provide investors with tools to better weather economic realities in 2017,” Onyema said.
He added that in order to drive liquidity; the Exchange will enhance its cross-border integration efforts through African Securities Exchange Association’s (ASEA) African Exchange Linkage Project (AELP) model and the West African Capital Market Integration (WACMI) programme.
“We will also continue our engagement efforts with the government to promote the listing of privatised state-owned entities, as well as engage with the private sector issuers for listings across all of our product categories. We anticipate that secondary market activity will be challenged initially as the impact of various policy measures work their way through the system. However, we expect to see a revival of supplementary listings, return of the new issuance market, and potentially one initial public offering (IPO) since the equity market is a forward indicator of the economy,” Onyema said.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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