Capital market: Shareholders, experts lament floppy monetary policy

… condemn delay in MPC meeting

Market cap picked by N3.3trn in Q4 2017 – Report

Shareholders and capital market operators have expressed concern over what they describe as instability and sometimes indecision, in Federal Government’s monetary policies, saying the scenario has impacted negatively on the performance of the capital market in the last one
year.

The operators, who spoke in separate interviews with our correspondent, said although the Nigerian Stock Exchange recorded moderate gains in the 2017 financial year, the performance would have been far better, had the government not pursued policies that were at variance with capital market growth.

Experts, who spoke on the market performance, said the equities were supposed to perform better than was witnessed in 2017, but for government’s policy summersault, which they argued, created a lull in the bourse.

 

High inflation rate hinders economic growth and is not only harmful, but also discourages saving and inhibits planning and investment, as people become more skeptical on the direction of prices of goods and services. The capital market feels this negative impact, which also dictates the direction of the market capitalisation

 

A stockbroker, Mr. Mathew Chineke, for instance, warned that it was time for the government and its agencies to begin to act more responsibly with regard to financial
issues.

Chineke observed that the performances of the quoted firms were the reflection of what was happening in the Nigerian economy, insisting that the inability of the Monetary Policy Committee of the Central Bank of
Nigeria to meet earlier than planned, for example, could impact negatively on the
economy.

“The MPC’s late meeting, owing to non-constitution of the committee, is likely to impact negatively on the 2018 first quarter results. The banking sector reacts to the various policies within the fiscal and monetary system. So, the sector would have done even better if there was a clear-cut monetary policy within the quarter,” he said.

For Ugochukwu Madubueze, a professor of economics, the fluctuating, real exchange rate impairs economic growth in a resource-rich country like
Nigeria.

He said, “Apart from that, high inflation rate hinders economic growth and is not only harmful, but also discourages saving and inhibits planning and investment, as people become more skeptical on the direction of prices of goods and services. The capital market feels this negative impact, which also dictates the direction of the market capitalisation.

“And it is hoped that the present diversification being preached by government would help in shielding the currency from oil price shocks in the
future.”

Reacting too, the Managing Director, Network Capital Limited, Mr. Oluropo Dada, said that the lack of policy direction could create distortion and uncertainty in the economy.

He said, “The monetary policy guidelines are tools in managing the economy. The delay in holding the meetings has led investors, especially those in the international space, to base key decisions on speculations. This is a pointer that all is not well with the
economy.”

The Chief Operating Officer, Heritage Global Securities, Mr. Daniel Adelaja, in his assessment, said, “At a time the Nigerian equities market was adjudged as one of the best in the world, that tempo was due to the positive ratings by some international rating agencies, and that tempo continued for quite some time.

“It was also sustained as a result of the earning reports of the companies that hit the market. But overall, I would say the fourth quarter has done well as activities have been very good. The market does not operate in isolation; it reflects the larger economy.”

COMPANIES GAINED N3.3TRN IN Q4’17

Meanwhile, quoted companies on the floor of the Nigerian Stock Exchange, in both debt and equity markets, have gained N3.3 trillion in the fourth quarter ended December, 2017.

According to the economic report of the CBN, which was obtained by The Point, the market capitalisation, which is the market value of all listed equities, increased from N19.6 trillion as at the end of the third quarter, 2017, to N22.9 trillion by the end of that year, which represented a 16.8 per cent
increase.

The transactions for the quarter revealed that the market capitalisation for the equity segment increased from N12.2 trillion to close at
N13.7 trillion.

Performances of quoted stocks remained buoyed by improved investors’ confidence and relatively favourable macroeconomic conditions, which include declining inflation as well as gradual recovery in economic activities.

Relative to the level at the beginning of the review quarter, the All-Share Index, which mirrors the performance of the market in terms of equity price movement, also rose by 7.9 per cent to close at 38,243.19 at the end of the fourth quarter of 2017.

SECTORAL PERFORMANCE

In the financial services industry, 13.3 billion shares, worth N106.4 billion were traded in 102,712 deals. This accounted for 46 per cent and 31 per cent of the total equity turnover volume and value, respectively, compared with 16.3 billion shares, worth N167.6 billion, traded in 141,865 deals, in the preceding quarter.

Consequently, the aggregate volume of traded securities rose by 41.2 per cent, to 28.7 billion; while the value of traded securities fell by 5.8 per cent to N339.4 billion in 177,691 deals, compared with 20.4 billion shares, worth N360.4 billion, exchanged in 251,921 transactions in the third quarter of 2017.

NSE PREMIUM INDEX

The NSE-Premium index, which tracks the performance of large firms listed on the premium board, also rose by 10.4 per cent to 2,564.13 at the end of the fourth quarter
of 2017.

Overall, with the exception of the NSE-AseM, NSE-Industrial Goods and NSE-Insurance indices, which fell by six per cent, 0.4 per cent and 0.3 per cent, respectively, at the end of December 2017, all other sectoral indices rose above the levels in the third quarter of 2017.

The NSE-Oil and Gas, NSE-Lotus Islamic, NSE-Pension, NSE-Banking and NSE-Consumer Goods rose by 17.8 per cent, 14.9 per cent, 12.9 per cent, 8.0 per cent and 5.90 per cent, respectively.