Nigerian Capital Market in 2015: Dashed expectations, aspirations In wealth creation

The year 2015 will go down in the history of the Nigerian capital market as a year the regulators, for the first time in five and half decades, appreciated investors’ by espousing new paradigm for domestic shareholders.

The paradigm followed the approval by the Securities and Exchange Commission and the Nigerian Stock Exchange for direct cash payment of proceeds from sale of securities into an investor’s nominated bank account.

The capital market regulators broke the 55-year analogue settlement jinx with an automated real-time payment regime.

The two regulators’ innovative investors’ settlement system, which commences January 4, 2016, is part of the ongoing initiatives to protect investors and eliminate fraud in the Nigerian capital market.

The novel system, if implemented successfully, will not only put an end to investors’ apathy and dismal confidence in the nation’s bourse, but will usher in a new era of sustainable wealth creation in the country.

The capital market committee meeting held in Lagos in November did the much-needed groundwork for the capital market ambitious sustainable development goals.

As major players in the nation’s economy, the capital market operators also ratified the recapitalization, the e-dividend system and laid a foundation for de-mutualization of the 55-year old Nigerian Stock Exchange.

The implementation of the capital market master plan and inauguration of the National Investor Protection Fund (NIPF) were some of the regulators’ bold steps to stem the retail investors’ drift from the bourse.

Aside from the policy innovation, the nation’s bourse was troubled by the instability in the Naira exchange rate against other international currencies, which discouraged foreign investors, major drivers of securities investments, from active participation in the market.

In 2015, the Nigeria capital market remained unstable, as the Naira hovered above N230 to the dollar for the better part of the year in spite of the various measures adopted by the Central Bank of Nigeria.

The pressure during the period under review followed what market analysts attributed to the dwindling global crude oil price and pressure at the foreign exchange market leading to the exit of foreign investors.

Foreign outflows as of November 30, 2015 amounted to N40.73 billion compared with N31.87 billion foreign portfolio managers invested in the same month.

Available records at the NSE, as of December 31, 2015, showed that the All-Share Index depreciated by about 17.36 per cent to close trading at 28,642.25 points, as against the opening index of 34,657.15 points.

The Market Capitalisation, which opened trading for the year at N11.478 trillion, lost N1.63 trillion to close trading on December 31, at N9.851 trillion.

SEC Director-General, Mounir Gwarzo, expressed dissatisfaction on the market performance in 2015.

“I’m not too happy the way the market is today, but it’s a swinging market,” Mr. Gwarzo said.

He described the state of the market in 2015 as a true reflection of the nation’s economic situation.

The SEC boss said the Commission was studying how government can use some fiscal policies to stabilise the market and encourage domestic investors to return to the market.

He was optimistic that the market would experience a turnaround in 2016 due to its various reforms and initiatives.

NSE Chief Executive Officer, Oscar Onyema, urged retail investors to mitigate investment risks by diversifying their portfolios across different asset classes.

The market, Mr. Onyema explained, was only reacting to the global economic and financial challenges within a well regulated market structure.

But in spite of the efforts of regulators to regenerate the economy through proactive regulatory regime, there was need for a framework for strategies aimed at strengthening and encouraging local investors participation in the real sector of the economy.

The restricted and discordant regulatory frameworks in the market appears to be an impediment to economic growth and inclusive development.

For the capital market and its community to effective maximize the recent investors drive of market policies, analysts say the regulators must also appreciate and implement the rule-based regulation from the perspective of an emerging economy.

Overall, investing in the Nigerian capital market in 2015 could best be described as the period of dashed expectations and derailed aspirations, in spite of the successful transition of the reins of power to an opposition-led federal government.

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