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Review of Nigeria's Stock Market in 2001 (Posted
28th Feb, 2002) Tell your friends about this page! Email it to them.
The economic performance in 2001 was mixed as the macro-economy environment witnessed both positive and negative influences. Even though, the budget was aimed to consolidate the arrangement for private sector-led economic growth and government demonstrated a commitment to implementing the privatisation programme and improving major infrastructure, the realisation of this goal could not be met because of the disparity in monetary and fiscal policies during the year.
The improvement in public power supply and the privatisation of the telecommunications sector, among others, stimulated economic activities. But the economy was unable to take full advantage of these developments, as interest rate and inflation rose in response to high government spending and subsequent liquidity control measures.
High interest rate during the year attracted funds away from the stock market and constrained corporate access to working capital. Nevertheless, the exchange rate was relatively stable, facilitating planning and budget control for companies with high import content.
In the out going year, The Exchange recorded a major turnover growth, with the market turnover increasing by 104.9%, from N28.1 billion in 2000 to N57.6 billion in 2001. In value terms, this is by far the highest annual turnover growth of The Exchange since it began operations. Activities also increased both in the Primary and Secondary market was realised.
Trading In Rights
There was significant activity in the evolving market for derivatives, with transactions in seven out of the ten right issues that were concluded during the year. A total of 591 deals were done in these right issues for 140 million shares valued at N286.5 million. In volume terms, this represents about 12% increase over the turnover recorded in 2000.
The following companies traded their rights on the exchange:
Cement Company of Northern Nigeria PLC.
The total market value of 261 securities listed on The Nigeria stock exchange appreciated by 40% to end the year at N662.6 billion. A combination of supplementary issue and price appreciation in the equities sector accounted for much of the growth in market capitalization. During the year, Nigeria Breweries PLC converted N6.9 billion of its N7 billion convertible loan stock into equities, and The Exchange admitted for listing, the N1 billion 21% First Edo State Floating Rate Revenue Bond 2002/2006, N3.5 billion 22% First Delta State Floating Revenue Bond 2003/2007 and N2.5 billion zero coupon Cadbury Nigeria PLC convertible loan stock2001/2008.
The stock of Nigeria Tobacco Company PLC was delisted in the Equities Sector of The Exchange. It was a voluntary delisting and this brings down the number of companies from 195 to 194. At the end of the year, the following 20 companies emerged with the highest market capitalisation, in descending order:
The All-Share Index
The Nigeria Stock Exchange All-Share Index grew by 35.2 percent to close the year at 10,963.11. Remarkably, the index had on 10th May 2001 crossed the 10,000 points mark. And on 17th October reached an all-time high of 11.339.61 before dropping to its year-end position.
Foreign Portfolio Investment
In lieu of the ever-increasing favourable condition bestowed on the Nigeria economy since the inception of democracy in May 1999, foreign investors continued to invest in Nigeria through the Nigerian Stock Exchange. The returns on Foreign Portfolio Transactions are soaring higher.
The Council of the Nigerian Stock Exchange considered and approved 23 applications for new issues valued at N45.6 billion, as against 21 applications for new issues worth N35.50 billion in the year 2000. Of importance is the approval of an Initial Public Offering (IPO), and two state government bonds. The renewed state governments' interest in the domestic capital market is part of the anticipated dividend of Democracy.
The famine of IPOs in 2001 was not for want of effort by The Exchange to attract new listing. Rather, the problem remains the fact that many Nigerian Corporate Managers are daunted towards the financing of their businesses through Capital market. Many are still tied to money market finance despite the associated problems of costs and fluctuations in interest rate. More so, many interested entrepreneur who wished to raise money from the capital market had to hold back for the fear of their issues clashing with major privatisation issues like NITEL PLC public offer, which, however, did not come during the year.
The Nigerian Stock Exchange remained focused on improving market infrastructure, expanding the market investors base, and consolidating the global outlook through active relationship with participating organisations in the international arena.
Also, in 2001, The Exchange started work on the upgrade of its Trading, Clearing, Settlement & Depository systems; Officials of The Exchange successfully completed an orientation programme in Canada in readiness for improved operations.
The Exchange signed Memorandum of Understanding (MoU) with International Stock Exchange of London, Egyptian Stock Exchange, JSE Securities Exchange of South Africa, Ghana Stock Exchange and Nairobi Stock Exchange. This was done ahead of the proposed international listing of NITEL PLC under the privatisation programme and to facilitate the cross-border listing of Nigerian securities.
Central Securities and Clearing System (CSCS), a subsidiary of The Exchange launched a "phone-in-programme" scheme to boost transparency and to enables investors to confirm their stockholdings in the CSCS Depository by telephone from any part of the country or world, at any time, organised a workshop for financial journalist as part of its corporate social responsibility and strategy for promoting stock market reporting.
In December 2001, The Exchange began a comprehensive review of its Rules and Regulations and Listing Requirements, with a view to align their Rules and Regulation and Listing Requirement with changes in the environment as well as the recently adopted harmonised Listing requirement of the African Stock Exchange Association (ASEA).
Future Outlook & Conclusion
According to Dr. Mrs. Ndi Okereke-Onyiuke Director General of The Nigerian Stock Exchange, the Capital Market looks to an early passage of the 2002 Appropriation Bill and a sustainable implementation of the Privatisation Programme, especially as it affects NITEL PLC. the downstream sector, the National Electric Power Authority (NEPA) and NICON, among others.
The Stock Exchange on its part, proposes to achieve full remote access to the Trading Engine, with dealers able to trade from their offices in any part of the globe. A V-SAT equipment to facilitate this objective has been installed in Lagos and final arrangement is being made for the transition to full remote trading as soon as possible later this year.
Editor's Note: is now know as Power Holding Company of Nigeria, PHCN, from 2005
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