Nigeria’s capital market suffers N346bn loss in February

Trading activities on the floor of the Nigerian Stock Exchange finished the month of February 2018 on a negative trajectory with market capitalisation of listed equities dropping by N346 billion to close at N15.549 trillion.

The drop in market capitalisation during the month was due to sustainable profit taking by investors, following gains recorded in January.

Also, the release of update on the October 8, 2014 Circular on Internal Capital Generation and Dividend Pay-out Ratio of Nigerian Banks by the Central Bank of Nigeria triggered off negative sentiment in the market.

The initiative did not go down well with the banks’ retail shareholders expecting bumper dividends from some banks in the country, and some analysts believe such action led to depletion of banks’ stocks, especially some tier-two banks that may be hard hit by the new policy, as they historically have had higher Non-Performing Loans and lower Capital Adequacy Ratios.

However, data obtained by our correspondent showed that activities on the Nigerian Stock Exchange, which opened the trading month at N15.895 trillion in market capitalisation and 44.343.65 in index points at the beginning of trading on February 1, 2018, closed the month on February 28, 2018 at N15.549 trillion and 43,330.54 index points.

Consequently, the market capitalisation has earned a month to date loss of about N346 billion or +2.28 per cent.

 

Drop in market capitalisation was due to sustainable profit taking by investors

 

Further breakdown of the weekly transactions for the month showed that aside from the gain recorded during the first two trading days and the last three trading days of February, the market recorded bearish activities during the rest of the weeks.

The All-Share Index grew by 296.34 basis points or 0.78 per cent to close at 44,639.99 index points on February 2, 2018, as against 44,343.65 recorded at the close of trading on January 31, while the market capitalisation of equities appreciated by N124 billion.

Trading activities during the second week ended February 9 revealed that the All-Share Index recorded the highest loss of 1512.07 basis points or 3.38 per cent to close at 43,127.92 index points as against 44.639.99 recorded the previous week, while market capitalisation of equities depreciated by N543 billion or 3.38 per cent to close at N15.476 trillion, compared to N16.019 trillion recorded the previous week.

On the third week ended February 16, 2018, the All-Share Index shed 489.09 basis points or 1.13 per cent to close at 42,638.83 basis points as against 43,127.92 recorded the previous week, while the market capitalisation of equities dropped by N175 billion or 1.13 per cent to close at N15.301 trillion, down from N15.476 trillion.

The stock market extended weekly losses as the stock market finished at a loss of N24 billion during the fourth week ended January 23, the lowest in the month.

However, the stock market finished the remaining three days ended February 28 bullish with a gain of N272 billion in market capitalisation.

Reacting to the development, the Managing Director, Crane Securities Limited, Mr. Mike Eze, said the depletion in the price of securities in the Nigerian stock market was as a result of profit taken by investors to increase capital gains.

The Managing Director, Trust Yield Securities, Alhaji Ola Yussuf, said the CBN’s initiative on dividend payment was in order.

“In the long run, what matters is: Are those companies making profits? If they are making profit, then it is good for the company. Are they paying out those profits? If they are not, then the companies are stronger and, therefore, people don’t need to sell-off their stocks because of that. That is why after the initial reaction by the investors, some of them are picking up because people are now realising that the circular will not necessarily have a negative impact on the share price of the stocks,” Yussuf said.