At a gathering of stakeholders in Lagos, Chief Executive Officer of the Nigerian Stock Exchange (NSE0, Mr. Oscar Onyema reviewed capital market performance in 2013 and gave a projection for the current year.
In December 2013, Nigerian Stock Exchange (NSE) equity market capitalisation surpassed the market cap at the peak of the market in 2008 (N13.23 trillion vs. N12.62 trillion). The capitalisation of listed equities grew by 47.33% (44.03% in $-terms) from N8.98 trillion ($57.49 billion) to N13.23 trillion ($82.80 billion); the NSE All Share Index (ASI) gained 47.19%; and average daily turnover for equities was N4.17 billion ($26.10 million), up 57.36% (53.83% in $-terms).
NSE closed the year with two new equity listings on the Main Board, while the Bond market recorded 19 new listings with a slight uptick in the value of new issues. See pages 3 and 5 for more details.
The bourse successfully launched its new trading platform, X-Gen, which supports trading of cash equities, bonds, and ETFs), and the first-ever issuer reporting portal in Nigeria, X-Issuer. The bourse also re-launched its Alternative Securities Market (ASeM) for small and medium companies, and introduced a new market structure for trading equities, along with fixed-income market making.
Macroeconomic indicators in 2013 remained mostly consistent with the second half of 2012. Key indicators such as gross domestic product (GDP), inflation and exports, as well as capital market indicators all moved in the positive direction. Nigerians were less dependent on imports1, and while internal debt grew2, so did the nation’s investment in infrastructure. Oil prices, though minimally volatile, remained largely favourable, staying above the 2013 federal government budgeted benchmark of $79 per barrel. These positive trends in the economy are despite the slowdown witnessed in several countries across the globe, including the BRICs3.
All the same, Nigeria faced her fair share of threats during the year – the oil sector suffered some disruption due to oil theft, but the nation sidestepped major setbacks:
1 N3.3tr ($21.3b) in imports, N7.2tr ($46.4b) in exports (H1„13)
2 $45.15bn internal debt.
3 Brazil, Russia, India and China thanks to the relative stability of crude oil prices. The decline of the Naira and that of Nigeria’s global rating on competitiveness, while managed, contributed to the dip in the nation’s foreign reserves ($43.61 billion at year’s end from $44.18 billion).
According to the National Bureau of Statistics (NBS), Nigeria skated by on higher GDP growth (6.81% in Q3 2013, up 5.09% from 6.48% for the same period last year), single-digit inflation (7.90% in November), and high interest rates (MPR of 12.00% in November). Exceptional growth was recorded (YTD through Q3 2013) in the agriculture (40.33%), finance and insurance (19.25%), building and construction (14.02%), hotels and restaurants (8.93%), and manufacturing (5.29%) sectors.
In the capital market, the bullish run that began in the second half of 2012, continued with greater impetus during the first quarter of 2013, and was sustained through most of the year (except from June to September when market indices fell due to concerns of the US Federal Reserve tapering its quantitative easing (QE) policy). Performance for the period under review was manifest in the outstanding gains experienced by the market indices (being among the best performing in the world), and in the appreciation of the NSE‟s market capitalization.
Total market cap rose by 28.92% (26.03% in $-terms), from N14.80 trillion ($94.74 billion) at the start of the year, to N19.08 trillion ($119.41 billion) on the last trading day of 2013. Equities market capitalization ended the year at N13.23 trillion ($82.80 billion), a significant milestone in the Nigerian capital market’s recovery from the 2008 “bust”. Similarly, May 30, 2013 marked the first time since May 2008, that equity market capitalization rose above N12 trillion ($75.09 billion), and the NSE ASI crossed 38,000 points, closing at 38,016.80; and, for the first time in the history of the Exchange, the share price of a listed company crossed the N1,000 mark. June 01, 2013, also recorded the largest single transaction on the NSE trading floor valued at N45.75 billion ($286.31 million).
Key contributors to the upward movement of share prices include: (i) strong corporate earnings by blue chip companies, such as banks and manufacturers of fast moving consumer goods (FMCG), (ii) increased capital inflow and portfolio investments, and (iii) tight regulatory oversight, aided by stronger enforcement by the Securities and Exchange Commission (SEC) and the NSE.
On-going reforms in various sectors of the Nigerian economy also yielded positive results. In the banking sector for example, measures such as financial inclusion, cashless banking, implementation of International Financial Reporting Standards (IFRS), risk-based supervision, and sustainable banking practices imposed by the Central Bank of Nigeria (CBN), continued to have an impact on the economy – no deposit money banks (DMB) reported losses for the year 2012, making them attractive in early 2013.
Notwithstanding certain national and market-specific challenges, along with the NSE ASI closing the year with its strongest performance since 2008, almost all NSE indices topped their performance pre-global financial meltdown. Compared to other global indices4 the NSE ASI gained 47.19% in 2013. More impressively, the NSE Oil/Gas Index soared 122.26%, the newly-introduced NSE Industrial Index grew 81.43%, and the NSE Lotus Islamic Index rose 61.84%. The NSE 30 Index appreciated 42.75%, the NSE Banking Index added 31.86% to its 2012 value, and the NSE Consumer Goods and NSE Insurance Indices both expanded by 31.14% and 29.01%, respectively. The NSE ASeM Index was the only index to buck the trend, shaving 0.24% off its 2012 value.
The number of listed companies and the number of listed equities at the end of 2013 were 190 and 198, respectively. The market for initial public offerings (IPOs) and new equity listings was flat with no IPOs recorded, and only two (2) new listings on the Main Board, while six (6) companies were delisted in 2013.
Small-cap stocks experienced the greatest growth, recording a 56.34% increase, followed by mid-cap stocks which were up 53.67%, and large-cap stocks, 31.61%.
NSE categorizes small-cap stocks as those with a market cap of less than $150 million, while mid-cap stocks have a market cap of between $150 million and $1 billion, and large-cap is over $1 billion.