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Stock Market Investors Record N604bn Loss In 2016

by Ike Obudulu Last updated on August 5th, 2017,

Stock market analysts have revealed that the uncertainty around foreign exchange (FX) availability and the country’s general monetary policies coupled with some tough fiscal policies in 2016 aggregated to ensure a huge loss of N604 billion by investors in the Nigeria’s capital market.

The sector analysts also revealed that the Nigerian stock market has followed similar loss pattern in the last three years. It would be recalled that the Nigerian stock market ended the year 2016 in a loss position, that left investors with a combined loss of N604 billion.

In summary, the All Share Index (ASI) slumped by 6.17 per cent to close 2016 at 26,874.62 points from 28,642.25 at which it opened trading on January 4, 2016.

It follows that the market capitalization declined by N604 billion to close at N9.246 trillion on December 30, 2016 from N9.850 at which it opened at the beginning of the year. This sad development in the stock market followed same scenario in the two previous years to post three year loss of 34.97 per cent.

Investors’ confidence remained significantly low as market net worth had declined by N3.98 trillion in the last three years. In the year 2016, the

Nigerian stock market was largely overshadowed by cautious and speculative tendencies despite cheap valuations across board on the back of weak investors’ confidence, which was driven mainly by the shrink in the economy.

Sector indices showed that Nigerian Stock Exchange, NSE Premium and NSE Banking are the only sectoral indices that closed in green zone with 6.98 per cent and 2.17 per cent gain respectively. The other nine sectoral indices closed in red, led by NSE Industrial Goods and NSE Oil and Gas with 26.37 per cent and 12.31 per cent loss respectively.

Insurance index went down by 11.4 per cent, NSE Main Board Index declined by 10.02 per cent, while NSE Lotus 11 and NSE 30 shed by 7.87 per cent and 7.18 per cent, respectively.

Others are NSE Consumers, ASem and Pension with a loss of 4.49 per cent, 1.57 per cent and 0.63 per cent respectively.

Quarterly review of the market for the year revealed that only in the second quarter did the market post a positive return of 16.96 per cent due to earnings.

Other quarters, first, third and four quarter posted a decline of 11.65 per cent, 4.27 per cent and 5.16 per cent, respectively as they reflected the realities of a weak economy as quoted companies reported significant weakness in their cash-flow, revenue and profit-base due to the impacts of receding economy during the year, which altered their valuations and fundamentals accordingly. This must have contributed to the continued bearish and negative returns for the year 2016.

The market also closed the year with negative market turnover as volume and value turnover declined by 6.86 per cent and 40.23 per cent to close at 86.21 billion units and N566.24 billion, respectively.

For the year, Dangote Flour led the gainers table by 276.11 per cent to close at N4.25 per share. UBA Capital followed with a gain of 108.40 per cent to close at N2.73, while Total gained by 103.39 per cent to close at N299 per share.

Seplat went up by 87.19 per cent to close at N379.99 and Mobil rose by 74.38 per cent to close at N279 per share.

On the other hand, Forte Oil led the laggards’ table by 74.42 per cent to close at N84.43 per share. Skye Bank trailed with a loss of 68.35 per cent to close at 50 kobo, while Caverton declined by 63.56 per cent to close at 90 kobo per share.

Also, Diamond Bank declined by 61.47 per cent to close at 88 kobo, while Sterling Bank shed 58.47 per cent to close at 76 kobo per share. Some market analysts blame the current market trend on the political, economic and financial situations in the country.

On the outlook for 2017, analysts said the developments in the global oil market, liquidity level in the foreign exchange markets, and realignments in fiscal and monetary policies would dictate trading pattern and performance of stock market in the year.

They are of the view that in the absence of a proper management, policies to stimulate economic growth and favourable developments from economic indicators, market performance in 2017 may remain bleak.

Dr. Okechukwu Enelamah

While the managing director of Stockswatch Limited, Mr. Abayomi Obabolujo stated that so long as the exchange rate of the Nigerian currency remains at its lofty height and foreign currency difficult to come by, manufacturers will operate more under huge burden of high cost of importation, leading to high production cost.

He added that performances in 2017 will be somewhat better than what obtained in 2016 in the sense that 2016 came more without notice, 2017 will still largely see many of these companies operating below capacity.

On how to sustain the capital market, he urged the operators and investors to look more at the medium and long-term investment windows rather than being caught up in the syndrome of short-term speculative actions, explaining that short-term speculative actions could harm the market and do nobody any good.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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