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10 companies control 79% of stock market size

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As BUA displaces Nestle
Listing of govt entities will boost market size — SEC

By Peter Egwuatu

Insurance
The floor of Stock exchange

TEN companies, led by Dangote Cement Plc, account for 78.8 percent of the market capitalisation of the equities listed on the Nigerian Stock Exchange, NSE, as at the end of trading in the month of January, 2020.

This is even as market operators and stakeholders lament the fragmented stock market with little trading options for investors and dealing members.

The market capitalisation is the value of all the 165 companies’ shares listed on the Exchange which stood at N14.9 trillion as at the end of January 31, 2020.

Financial Vanguard’s investigation reveals that any significant shift in the share prices of four or five of the 10 companies determines the overall fortune of the market, a situation market operators say, does not reflects the performance of the economy since many other big companies across all sectors are not captured in the stock market.

Consequently, operators and stakeholders seek a market structure where more medium and large companies across the sectors of the economy are listed on the Exchange.

The ten companies are Dangote Cement Plc, MTN Nigeria Communications Plc, BUA Cement Plc, Airtel Africa Plc, Nestle Nigeria Plc, GTBank Plc. Others include: Zenith Bank Plc, Nigerian Breweries Plc, Stanbic IBTC Plc and Access Bank Plc.

READ ALSO:Dangote remains Africa’s wealthiest person for 9th consecutive year

The Acting Director General, Securities and Exchange Commission, SEC, Mary Uduk, has emphasised the need for Government Corporations to be listed on the Exchange.

Uduk made this known recently when members of the Senate Committee on the Capital Market paid her a courtesy visit.

She used the occasion to seek the lawmakers’ support towards ensuring that corporate entities belonging to the Government get listed on the NSE.

She stated: “This would help boost local investors’ confidence, as well as attract foreign portfolio investment.

”We have very big government corporations that can be listed and that will give foreigners comfort to list on the Exchange. If this happens, it will be good for our market and also give confidence to investors”.

Top 10 profile

An analysis of the market capitalisation showed that the 10 companies accounted for N11.7 trillion out of the total of N14.9 trillion in the period under review.  Dangote Cement Plc has the highest capitalisation of N3.1trillion or 20.63 per cent of total equities market capitalisation.

The newly listed MTN Nigeria Communications Plc occupied the second position with N2.4 trillion or 16.4 percent of the total market capitalisation.

Also newly listed BUA Cement Plc has overtaken Nestle Nigeria Plc to occupy the third position with N1.3 trillion and accounting for 8.4 percent of total equities market capitalisation. Meanwhile, BUA Cement Plc has become the first company to list on the Exchange this year. The Company achieved this feat with the listing 33.86 billion ordinary shares at N35 per share, emerging as the third largest company on the bourse.

Another communication giant, Airtel Africa Plc, also newly listed on the Exchange, has beaten Guaranty Trust Bank, GTB, to the fourth position recording N1.123 trillion and accounting for 7.6 percent of the total equities market capitalization.

Equities market capitalization

Nestle Nigeria Plc which hitherto occupied the third position is now in fifth position with N1.093 trillion and accounting for 7.4 percent of the total equities market capitalisation.

GTB followed next on the chart with N882.9billion to occupy the sixth position of the top ten equities and accounting for 5.9 percent of total equities market capitalisation.

Zenith Bank Plc records N654.6 billion market capitalisation, just as Nigerian Breweries Plc and Stanbic IBTC Holdings Plc account for N439.8 billion and N401.8 billion respectively.

Seplat Petroleum Development Company Plc occupied the tenth position with N356.01 billion and accounting for 2.4 percent of the total equities market capitalization.

Stakeholders/Operators comment

Speaking to Financial Vanguard on the market structure, Chief Operating Officer, InvestData Limited, Mr. Ambrose Omoriodon said: “In any market of the world there are different categories of stocks that led to different indexes to measure their performance. These 10 stocks or companies on the NSE influence the general market performance as a result of its capitalization. It is expected that these companies should have created more wealth for Nigerians due to their huge earnings, but the share holding structure and float has not helped in this matter.

‘‘To reduce the influence of these 10 companies and balance the market more new companies should be encouraged to list on the Exchange as the economy is expected sustain its recovery this year, 2020.

“The present market fragmentation is not the best for our market; we need to have standardized market where we have companies from across the sectors of the economy listed so that no one firm or few firms will be domineering and dictating the movement of the market as we currently experience.

“The performance of companies already listed is very important to attract investors to patronize their shares. If the companies are doing well and expanding to create jobs that boost productivity, consumption and income which oil the macro economy it will be better for the market and economy in general. ‘‘Therefore, government should first provide enabling business environment for small and medium size companies to strive, and at the same time encourage investment by reducing cost of transaction and multiple taxation, which the new finance bill claim to address but not clear yet.

‘‘The listing requirement and cost should equally be looked at to encourage new listing and sustain already listed ones because the rate of volunteering delisting is on the increase.”

Another market operator and Head of Research and Investment, FSL Securities Limited, Mr. Victor Chiazor said: “In reality, more than 10 companies dominate trading activities on the Nigerian Stock Exchange but the number can still be significantly improved to give more trading options to the investors and  dealers  to trade,  else we may  have a fragmented stock market with little trading options. The market has close to 200 listed trading options for any investor which range from listed companies to Exchange Traded Funds.

However, the performance of these listed entities, most times, have not been impressive enough to drive liquidity towards them and the stock exchange has no powers over the earnings quality of these companies.

‘‘If the market remains fragmented with limited trading options, it will send negative signals on the economy, and further driving away prospective companies who may have the intention to list as they may see no value in listing on the Exchange.

“One of the best ways the government can encourage more listing is by giving incentives like tax cuts and other business friendly fiscal policies which will benefit companies listed on the Exchange.”

Commenting as well, National Chairman, Progressive Shareholders Association of Nigeria, PSAN, Boniface Okezie said: “With over 200 companies listed on the Exchange and only 10 companies dominate the market is a wakeup call to other companies to make haste in making their entities very attractive to investors to have faith in them.

‘‘What is happening here is that people have lost confidence in them; maybe they have not been doing well since they got listed in terms of dividend payments and the very capital appreciation is never encouraging to bring investors patronage.

”The implication on the economy when such companies are not doing well is that they cannot be able to pay good corporate tax as when due, and people who invested in them will continue to incur loss year in year out as a result of poor performance.

‘‘The world is watching our super regulators in this regard. So there are more work needed from the regulators to find ways of making the listed companies attractive.”

Reacting, another stakeholder and Chairman, New Dimension Shareholders Association of Nigeria, Mr. Patrick Ajudua said: “The implication of the companies dominating the market is the positive expectation that investors have in them.  Going by available financial results from the companies, investors are set to enjoy good returns on their investment.

So they will attract attraction and more people will go for them. Therefore, with the demand and supply analysis their prices will continually reflect in the movement of the entire market capitalization.

“On the effect to the economy, well the economy will also reap from it by way of taxation which of course will result in improved earnings for the government. The effect of it is felt via capital releases which will then stimulate economic growth.’’

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