Economic outlook

January 1, 2019

Stock market in 2018: Investors’ loss peak at N1.9 trn Year to Date

Stock market in 2018: Investors’ loss peak at N1.9 trn Year to Date


By Peter Egwuatu & Nkiruka Nnorom
A huge rally in the last trading day at the Nigerian Stock Exchange, NSE, yesterday which gained 1.27 perccent could not save the market from abysmal negative full year result. In the end the market recorded -17.8 percent loss for the year 2018.

The Nigerian Stock Exchange All-Share Index (NSE ASI) notched a nine percent gain in first quarter, Q1’18 amid significant foreign interest.



However, investor uncertainty emerged in subsequent quarters, with the ASI dipping eight percent and 14 percent in Q2’18 and Q3’19 respectively, driven by pre-election jitters and weak emerging market sentiment.

Also, the global phenomenal affected the Nigerian stock market by heightened trade tensions between the U.S and China, volatile commodity prices, and monetary tightening in the United States.

Consequently, the stock market has lost -17.8 percent or – 6,812.69 points as the benchmark market Index, NSE ASI close at 31.430.50 points on Monday December 31, 2018     from 38,243.19 points it closed on December 29, 2017.

Similarly, investors have lost 13.9 percent or N1.9 trillion of their investment value, represented by market capitalization which stood at N11.720 trillion at the close of trading on December 31, 2018 from N13.609 trillion at the end of trading in December 29, 2017.

Weak primary market

The primary market segment of the stocks space was relatively healthy in 2018 as we saw the listing of two new companies on the Exchange (NOTORE and SAHCO) and a combined market capitalization of ¦ 130 billion added to the market.

However, the total value raised from Rights Issues declined to ¦ 130 billion in 2018 (including the proposed ¦ 90 billion WAPCO issue). from ¦ 340 billion in 2017 .This may be attributed to the post-January slump in the Nigerian stock market (ASI 30.97 percent down since the end of January) which discouraged corporates from raising additional share capital even as cost of debt moderated through the year.

Meanwhile, alternative debt financing has been on the rise as Federal Government bonds have long-since dominated the fixed income market, accounting for 66 percent of all issued securities in 2018.

Notably there has been an increase in issuance of alternative instruments in recent times, such as the ¦ 100 billion Sukuk bond issue in 2017, a $29 million Green bond issuance in 2018, and the commencement of a monthly retail savings bond programme in March 2017. The different instruments have had mixed results. Whilst the sukuk and green bond received a healthy investor reaction (another sukuk issue that was completed recently towards the end of 2018), interest in the retail savings bond has been weak, with under ¦ 10 billion raised so far.

Analysts at Vetiva Capital Management stated that its expects the Debt Management Office DMO to keep driving the inclusion of alternative fixed income instruments and judge this to be positive for market deepening and diversification.

PFAs and the multi-fund structure

The new National Pension Commission (PenCom) regulation on a multi-fund structure for Pension Fund Administrators (PFA) came into effect in July 2018, with PFAs granted a 6-month grace period to comply with the new rules. The multi-fund structure is targeted at increasing PFA exposure to variable income investments such as equities as PFAs have long-since favoured FGN securities, investing 73 percent of Asset under Management (AUM) in this asset class in 2016, compared to 8 percent in equities. Whilst PFAs have slowly increased equity exposure to10 percent of AUM in March 2018, the slump in the Nigerian equity market has eroded holdings to 7 percent of AUM in September 2018. The PFA sentiment towards the equity market has been weak amid adverse external conditions and a slow-growing economy, and it is expected that regulation as the primary driver of near-term additional equity exposure.

Delisted stocks

Four companies – 7-Up Bottling Company Plc, Paint & Coating Manufacturers Nigeria Plc and Great Nigeria Insurance (GNI) voluntarily delisted from the exchange, while the shares of Skye Bank Plc was delisted following its nationalisation by the Central Bank of Nigeria (CBN).

Meanwhile, the NSE listed the pioneer N10.69 billion FGN Sovereign green bonds and N100 billion Ijara Sukuk on its platform. Sukuk are bonds structured to generate returns to ethical investors without infringing on the Islamic law which forbids interest payments.

Deepening participation level in stock market

As part of efforts to increase market participation and create awareness on the existing products, the Exchange hosted the 2018 edition of its Exchange Traded Products (ETPs) conference, which attracted fund managers, regulators, capital market intermediaries, as well as current and prospective ETP issuers.

Also, ahead of the introduction of the Derivative and Futures in the stock market, the NSE held capacity building for stockbrokers as part of strategic initiatives to enhance their efficiency to trade the asset class.

The par value rule that bars stocks from trading below their nominal value and floor price of 50 kobo per share was amended, allowing stocks to effectively trade to as low as one kobo per share to improve liquidity and participation level in the stocks previously affected by the rule. The Exchange also hosted the NSE-LSE dual listing conference to explore the possibility of London/Lagos listing.

Other key developments

Access Bank Plc, Lafarge Africa, Seplat and UBA were migrated to the Premium Board, the listing segment for the elite group of issuers that meet the Exchange’s most stringent corporate governance and listing standards. Also, in fulfilment of its desire to champion sustainable capital market practices in Africa, the NSE announced the approval of its Sustainability Disclosure Guidelines.

Capital market developments

The apex regulator of the Nigerian Capital market, Securities and Exchange Commission, SEC during the year 2018 embarked on some initiatives to develop the market.




The commission in tackling the lingering issue of multiple subscriptions and forbearance for shareholders with multiple accounts, the SEC through its Capital Market Committee, CMC agreed that the forbearance window should be extended by another year from the December 31,2018 deadline previously communicated. It is expect ed that shareholders will take advantage of this opportunity to claim their unclaimed dividends and bonuses.

The commission during the year announced a two-pronged approach to addressing the intractable challenges associated with transmission of shares related to the estate of deceased investors. The first step would involve engagement with and enlightenment of the Probate Registry with a view to providing solutions to the cumbersome process of transmitting shares. Secondly, Rules would be developed around the time frame for transmission shares and the fee structure.

e-dividend mandate, direct cash settlement initiatives

Furthermore, in order to boost the e-dividend mandate and Direct Cash Settlement initiatives, the commission had given commitment to the market that it would engage NIBSS (Nigeria Inter-Bank Settlement System) on behalf of the capital market community to facilitate identity validation and account validation in an effort to enhance market processes.

The commission is also collaborating with the CBN to update regulations on margin lending.

In furtherance of the commitment to develop a vibrant commodities eco-system, the commission has commenced the implementation of measures to strengthen regulatory capacity by establishing a Commodities Division.

An interesting development in the commodities sector is the innovative solution developed by AFEX Commodities Exchange Limited (AFEX) and its partners regarding the use of BlockchainTechnology to streamline the process of financing agriculture to Smallholder farmers and other players in the commodities markets.

Fintech roadmap for the capital market

The SEC during the year under review formally inaugurated the Fintech Roadmap Committee, Chaired by Ade Bajomo. The Committee is expected to develop a Fintech roadmap for the capital market by first quarter 2019.

The market provided an update on the Electronic distribution of annual accounts by public companies to shareholders. It was reported that the shareholders have largely accepted the new initiative and are willingly providing their email addresses. It was agreed that further sensitization would be carried out by stakeholders to enlighten shareholders on the benefits of the initiative.




Unlisted Securities

On the need to grow the market for trading in securities on unlisted public companies, the commission has been making concerted efforts in collaboration with CAC and other stakeholders to assist public companies that are yet to register their securities to do so without much difficulty.

Similarly, in order to enhance investors’ confidence in the market, the commission has stepped up efforts to ensure that public unlisted companies provide quarterly and annual performance reports. This would assist investors to make more informed investment decisions.