Foreign investors exit, political uncertainty mar equities market by N897bn in 8 months


By Olabode Jegede

Following foreign investors exit and pressure building up towards the 2019 general elections, the investors investment in the equities market segment of the Nigerian Stock Exchange (NSE) depreciated by N897 billion in eight months.

The equities market early in the year started on a positive note over the Central Bank of Nigeria (CBN) foreign exchange intervention and federal government liquidity injection.

The lower yield in Treasury Bills had forced investors to invest in the capital market as yield was attractive.

According to our correspondent findings, the market capitalisation of all listed equities on the NSE opened trading on January 1 at N13.619 trillion, dropped by N897 billion or 6.59 per cent to close trading on August 31 at N12.722 trillion in the year under review.

Consequently, the All-Share Index (ASI) declined by 3,394.74 basis points, representing a drop of 8.88 per cent to close at 34,848.45 basis points from 38,243.19 basis points it opened for trading in January 2018.

Following the drop in capital market major indicators, the NSE indices also go with decline performance.

Other indices also finished lower with NSE ASeM recording the highest decline followed by NSE Consumer Goods Index and NSE Industrial Goods Index.

The breakdown revealed that, NSE ASeM dropped by 25.51 per cent to 809.92 basis points in August from 1,087.32 basis points the market opened this year.

NSE Consumer Goods Index dropped by 15.96 per cent to 820.35 basis points from 976.1 basis points while NSE Industrial Goods Index. Closed August at 1,667.55 basis points,        15.59 per cent below 1,975.59 basis points the market closed in 2017.

Profit-taking in Guaranty Trust Bank Plc, among others dragged the NSE Banking Index down by 11.98 basis points to 418.5 basis points from 475.44 basis points while NSE Oil/Gas Index      closed August at 298.24basis points, 9.81 per cent below 330.69 basis points the market opened this year.

Amidst the political uncertainty in the 2019 general election, Market statistics obtained by our correspondent revealed that total foreign transaction significantly declined by 64.68 per cent from N102.41 billion in June to N36.17 billion reported in July 2018.

Similarly, Total transactions dropped by 22.21 per cent from N187.78 billion recorded in June 2018 to N146.07 billion in July 2018.

Foreign outflows reduced from N54.45 billion to N16.34 billion, representing 69.99 per cent whilst foreign inflows also reduced by 58.65 per cent from N47.96 billion to N19.83 billion over the same period.

Speaking with our correspondent, Chief Executive Officer, Enterprise Stockbrokers Limited, Mr. Rotimi Fakayejo, said the market lately has been inactive, stressing that buildup towards the 2019 election is affecting the market fundamentals.

According to him, “Well, it is not far fetch from what it has been before. First, the liquidity in the market is low.

“Secondly, the foreign investors have always played the dominance role in the market. To an extent, they have backed out for now because of the negative reactions to frontier and emerging market all over and also for the fact that Federal Reserve in US is at the increasing rate.

“The European countries too are also thinking in that direction at least after a very long time. So, it is making funds to dry up on the frontier and the emerging market. At the same time, the political situation in Nigeria is also contributing so much because a lot of uncertainty is parading in the market right now.

“Until maybe when we get to October, and it is more likely that there would not be a formidable opposition against the incumbent president. Then, I believe things will begin to calm down thereafter but if there is a formidable opposition, we may likely see a decline trend in the equities market.

“So, we may not see any major decline in the market for now except maybe one full week loss and then one day gain. The losses may not be too significant and the gain may not be very marginal.

“We might just be seeing the All Share Index dropping marginally but if peradventure the third quarter results are filing in by October and the results are not impressive, then I think the market could continue to drop.”

Commenting also on the equities market performance in eight months, the Managing Director, Highcap Securities, Mr. David Adnori said, the equities market reacted on mechanism that related to socio-economy activities in the country.

He maintained that weak corporate earnings and CBN actions against listed banks also compounded on equities market performance lately in August.

According to him,, “as we move towards the election, it is not likely that the market will be vibrant and political risk is still there. The market must also come to the level of resistance wherein it will not decline. The macroeconomic indicators are okay apart from the political issues on ground.”