…as portfolio investment grows by 84.03 per cent
In line with global best practices, investors at the Nigerian Stock Exchange have in the last decades, been clamouring for the revamping of the nation’s capital market, even as portfolio investment rose to 84.03 percent in two months.
The consensus is that unless the key players in the Nigerian economy list their shares, and work with relevant stakeholders to revamp the nation’s bourse, it will not make progress, as the stock market is known for its important elements in the economic development of any nation.
Analysis of data obtained from the NSE showed illustration of stock market performance between December 2019, and January 2020.
A report from the Exchange’s domestic and foreign portfolio investment as at 31 January 2020 showed 84.03 percent increase from N127.94 billion in December 2019, to N235.46 billion in January 2020.
Similarly, total foreign transactions also went up by 11.35percent from N63.14billion to N70.32billion within the same period under review.
Further analysis of the stock market performance in the month of January showed that the value of domestic transactions executed by institutional investors out-performed retail investors by 2 percent, while a comparison of domestic transactions in the current and prior month (December 2019) revealed that retail transactions increased by 233.75 per cent from N24.47 billion in December 2019 to N81.67billion in January 2020.
On the other hand, the institutional composition of the domestic market also increased by 107.02percent from N40.32 billion in December 2019, to N83.47 billion in January 2020.
Operators and analysts, who spoke with The Point, explained that there were galaxies of registered local businesses that readily qualify to list on the exchange, but have failed to do so, just as the listing profile of the exchange does not include corporations in the commanding heights of the Nigerian economy.
Operators insist on market revamp
A stockbroker, Mr. Udechukwu Ubani, said: “Unfortunately as a platform for capital formation and distribution of wealth, the non-listing of major companies has been denying many Nigerian investors the opportunity to share from the profits of those companies. Ironically, most of these Nigerians contribute to the revenue and profit of those firms through their patronage.”
He noted that the Oil and Gas sectors and the telecommunication firms are scarcely represented in the market, adding that some of the industrial sectors have yet to list their shares.
“Though to be listed is to be in the public spot light which connotes transparency, accountability and integrity all of which are key aspects of corporate governance. It shows a willingness by the owners of the businesses to share their profits with the public through dividends, bonus issues, capital appreciation of share prices towards the empowerment of the investing public,” he said.
Ubani said even in the midst of public exposure, there are numerous benefits of listing companies besides the cost effectiveness of raising capital, when compared to the money markets; it is also easier for listed companies to access capital from both the existing shareholders and the public.
Analysts want fiscal incentives for firms
Infuriated by the reluctance of multinational companies to get listed, a capital market analyst, Chief Ayodeji Akorede, said the Federal Government should impose sanctions on the big firms that would not list their shares on the Exchange, in order to afford Nigerians the opportunity to invest in the companies.
He noted that the current economic situation had further necessitated the need for big firms to list immediately, adding that the government should be the key driver through tax incentives to ensure listing of multinationals companies on the nation’s bourse.
“The Federal Government should impose sanctions on any of the companies that fail to comply with the directive,” he said.
An investment banker, Mr. Davidson Adesanya, said government should come out with initiatives aimed at increasing the number of listed companies on the stock exchange, as listing of multinationals would be the major target in the next dispensation, and that telecommunication companies should seek listing because of opportunities in the market.
Meanwhile, the former Speaker of the House of Representatives, Yakubu Dogara, said there was no justification for the failure of multinational companies to list on the stock market.
“Big companies in the two major sectors have to list their shares in order to create employment, deepen the market and make capital available for investors,” he said.
Dogara, who was speaking when he visited the NSE during his tenure in office, said, “It is even more unacceptable that they are not listed or quoted on the stock market, yet they are quoted elsewhere. The flow of resources from the citizens of this country is what made them rich.”
It was in line with this that the telecoms giant, MTN immediately took a bold step to list its shares on the Stock market as soon as it was commercially and legally possible last year.
Managing Director, Highcap Securities Limited, Mr. David Adonri, said revamping of the capital market is a welcome development, as it would lure investors.
Adonri, who lamented that the country missed the opportunity of compelling telecoms companies to list on the NSE when the NCC licensed them some 15 years ago, said in attracting major private companies that occupy the commanding heights of the economy to list, the government must, as a matter of urgency, grant them fiscal incentives.
He explained that companies list their securities in stock markets to have access to long-term capital and that capital formation was the essence of an efficient stock market, adding that the coming of big ticket companies will equally encourage other multinational firms to embrace the stock market.
President, Association of Telecoms Companies of Nigeria, Mr. Olusola Teniola, said, “This is, no doubt, a good boost to the nation’s economy. By listing in Nigeria, we are beginning to see great opportunity for the country and for us in the telecoms industry; we consider this a favourable step.”
He pointed out that “Nigeria is number one in economy in Africa, the market has to correspond to being number one in Africa and there is no way we can get there if the major companies in the country are not listed on NSE. The listing of the telecom firm is commendable.”
For the Chairman, Association of Licensed Telecoms Operators of Nigeria, Mr. Gbenga Adebayo, MTN’s move should be an example to other telecoms companies. With this step, other multinationals are sure to follow suit.
He added that new listings are essentially in pursuit of equity capital as against debt finance, which companies can obtain easily from the money market.
“As a result of this, the incentive to list afresh is almost non-existent now. New issues that facilitate capital formation take place in the primary market. Although new bond issues have, in recent past, flooded the primary market, new equity issues have virtually disappeared,” he said.
