The Nigerian Stock Exchange (NSE) will in 2020 proceed to the next steps of its Demutualisation, which includes seeking formal approval from its members on the demutualisation scheme, CEO, Oscar Onyema, said Monday in Lagos.
Onyema disclosed this at the review the market for the year 2019 and outlook for 2020, at the annual event well attended by representatives of Dealing Member firms and investment analysts.
The NSE had received the Securities and Exchange Commission’s (SEC) ‘No Objection’ on its demutualisation, having met the necessary requirements of the apex market regulator.
A key aspect to the Exchange’s vision of becoming Africa’s preferred exchange hub is to successfully demutualise the organisation.
Demutualisation is the process through which a member-owned organisation becomes a shareholder-owned company.
Basically, it refers to the conversion of a non-profit, mutually owned company to a for-profit entity limited by shares. Demutualisation segregates ownership and management from the trading rights of the members of an exchange.
“We are committed to continually provide clarity on the demutualisation process to our various stakeholders through regular engagements.
“While keeping an eye on the strategic intent of The Exchange post demutualisation, we will continue to leverage our vast network of stakeholders, in addition to developing new strategic partnerships with the goal of delivering better products and services to our customers,” Onyema said.
A seasoned stockbroker, Kasimu Kurfi, who is the CEO of APT Securities and Funds Limited, said: “We will appreciate if the demutualisation will come very much earlier.” He said a demutualised exchange would encourage more listings.
“Commencing demutualisation will change the structure of the market as the current owners; the dealing member firms shall become shareholders and thus bring a new era of corporate governance on the Exchange,” according to Sola Oni, a stockbroker.
“As African Champions, we will maintain momentum in executing the NSE’s 2018 – 2021 Corporate Strategy in our efforts to elevate the prominence of Africa’s global financial markets,” Onyema said further.
The Nigerian stock market which posted a negative return of -14.60percent to close the year 2019 started the year 2020 on a good note, with the NSE ASI recording a 9.48percent improvement year-to-date.
“Domestically, market sentiments may be buoyed by a steady and stable recovery in the domestic economy, alongside continued sustainability in monetary policy.
“The signing into law of Nigeria’s Finance Bill 2019 and implementation of the 2020 budget may have a positive impact on companies’ earnings as well as consumer spending,” the NSE CEO told the audience.
In the anticipation of Derivatives trading on the Exchange, the NSE released a derivatives market rulebook that will serve as a guide for trading derivatives on the bourse.
The SEC had said one of its top priorities in 2020 is to develop an efficient derivatives trading market.
Derivatives are securities that derive their value from underlying securities or assets. Stockbrokers believe derivatives trading will enhance price discovery and usher investors on the Exchange to modern risk management whereby they can hedge against volatility.
“Accordingly, the Exchange will continue to advocate for business-friendly economic environment, working in conjunction with both the Public and Private Sectors,” he said.
In line with the Exchange’s commitment to protect investors in the Nigerian stock market, the Onyema-led executive team said it facilitated restitution and recovery of shares worth N1.436 billion for investors in 2019.
In 2019, global capital market performance varied widely, primarily driven by regional economic performance.
The Nigerian bourse had to compete with developed and emerging capital markets which saw risk-based assets priced and valued more competitively.
Investors contended with the macroeconomic landscape; fiscal and monetary policy direction and a wait-and-see attitude given the trends in foreign portfolio investments (FPIs).
Also, despite a welcome stability in the FX market due to the CBN’s intervention, concerns around the stability of the Naira remained prevalent.
Although the Nigerian Stock Exchange’s All-Share Index (ASI) posted a negative return of -14.60percent to close the year at 26,842.07 points, the ASI reached a year-high of 32,715.20 points in February 2019.
Furthermore, the equity market capitalisation increased by 10.55percent to N12.97trillion in 2019, from N11.73trillion in 2018, largely due to sustained primary market activities throughout the year. The most notable the listings were those of MTN Nigeria Communications plc, and Airtel Africa.
NSE indices also posted negative returns during the review year with the NSE Consumer Goods Index being the most impacted, declining 20.83percent, followed by the NSE Main Board Index and NSE Lotus Islamic Index, which dropped by 20percent and 17.87percent respectively. The NSE Insurance Index and the NSE Premium Index were the least impacted, declining by 0.52percent and 3.59 percent, respectively.
Equity market turnover in 2019 decreased by 19.70 percent year-on-year from N1.2trillion recorded in December 2018 to N960billion in December 2019. The financial services sector which accounted for over 50percent of total activity remained the highest traded in volume and value in 2019, as was the case in 2018.
To support the equity market in 2019, the NSE rolled out various new initiatives such as a new market structure to enhance liquidity and ensure overall market stability alongside efficiency, as well as launched the beta version of the X-Mobile App (a dynamic and user-friendly mobile app) to boost retail investors’ participation.
The NSE fixed-income market performed exceptionally well in 2019, as market capitalisation increased by 20.42percent to N12.92trillion from N10.72trillion in 2018. Turnover also increased by 389.26percent when compared to 2018.
Capital raising was dominated by the Federal Government, being responsible for 60percent of bond issuances during the period in a bid to finance fiscal and infrastructure deficits.
The year 2019 saw the ground-breaking listing of Access Bank Plc’s N15billion Green Bond, the first of its kind to be issued by an African corporate. The Exchange also saw the listing of North South Power Company Limited’s N8.5billion corporate infrastructure Green Bond, which was oversubscribed by 60percent, with firm commitments from 12 institutional investors including nine pension funds.
Capital raising by corporates increased by 321.61percent with a total of N132.68billion raised in 2019. In the Exchange Traded Fund (ETF) market, the bourse saw the listing of Greenwich Alpha ETF from Greenwich Asset Management Limited which tracks the NSE 30 index.
Despite the 61.37 percent year-on-year (yoy) decline in trade volumes, 46.43percent fall in turnover, there was a 7.43percent year-on-year increase in the market capitalisation to close the year at N6.58billion.
The best-performing ETF was the NEWGOLD ETF as it returned 31.75 percent indicative of the shift towards more stable investment securities.
Iheanyi Nwachukwu
