The Buhari Legacy Series: Stock market saw foreigners’ exit, big listings under Buhari

The stock market usually reflects the economic condition of a country. In the eight years of the administration of President Muhammadu Buhari which will come to an end on May 29, the total market value of equities increased, many firms exited the market while several big firms came in, and foreign inflows plummeted to a record low, among other developments.

On May 28, 2015, the All-Share Index (ASI), which tracks the general market movement of all listed equities on the Nigerian Exchange Limited (NGX), was 34,310.37 basis points while the market capitalisation – which is the cumulative value of all companies’ shares – was N11.66 trillion.

As at May 5, 2023, the NGX ASI stood at 52,403.51bps while the value of equities was N28.53 trillion. The growth in the market cap was driven by major listing amid a series of voluntary and regulatory de-listings.

“Investors’ confidence in Nigeria is already lower than it was a decade ago if you use the amount of foreign direct investment as an index. To make thing worse, foreign investors have been complaining loudly about their difficulties in repatriating funds from Nigeria,” said Eben Joels, country leader for Stransact, RSM correspondent firm for Nigeria.

Total transactions on the NGX were N146.22 billion in March 2023, compared to N145.45 billion in May 2015.

Total foreign inflow was N4.60 billion in March 2023, down from N38 billion in May 2015. Total foreign outflow stood at N4.59 billion in March 2023, compared to N41.77 billion in May 2015.

Foreign transactions, which were valued at N79.77 billion in May 2015, plunged to N9.19 billion in March 2023. Domestic transactions, however, jumped from N65.68 billion in May 2015 to N137.03 billion in March 2023.

Foreign investors’ share of equities deals dropped from 54.84 percent in May 2015 to 6.29 percent in March 2023, while that of domestic investors increased from 45.16 percent to 93.71 percent.

“Capital importation, including foreign portfolio investments (FPI), has been weak and continued to trend downward, with total capital importation in 2022 printing at over 20 percent decline to 2021 levels and indeed a significant weakness to 2020 and pre-COVID years. This again reflects a lack of investor confidence in the FX regime, especially with current foreign currency rationing occasioned by relative scarcity,” said Abiola Rasaq, an economist and former head of investor relations at United Bank for Africa Plc.

The big listings under Buhari

In 2019, telecommunications giant MTN Nigeria Communications Plc listed 20 billion ordinary shares at N90 per unit on the Premium Board of the Nigerian stock market. As of then, the listing price valued the telecoms company at N1.84 trillion. MTN Nigeria decided to list its local company in the country after agreeing to pay a $1.7 billion fine to settle a SIM card and tax dispute with the Federal Government.

In 2021, the company set a retail public offer price that was lower than its share price on the stock market. MTN opened its offer for sale to retail investors at N169 per share to sell up to 575 million shares in MTN Nigeria. The public offer, which closed on December 14, marked the first phase of a share sale to retail investors where the majority of investors in the company would seek to sell down holding in MTN Nigeria to 65 percent over time. On Friday, the share price of MTN stood at N228.90.

Airtel Africa Plc, another telecommunications company, listed its entire issued ordinary shares on the secondary market of the main board of the stock market on July 9, 2019. It was a cross-border secondary listing of 3,758,151,504 ordinary shares of Airtel Africa at an offer price of N363 per ordinary share. The listing added N1.36 trillion to the market capitalisation of the Exchange, further deepening the Nigerian capital market. On Friday, Airtel was N1,250 per share.

In 2020, BUA Cement Plc listed 33.86 billion ordinary shares at N35 per share. As at May 5, 2023, the share price of the cement maker stood at N97.85. Two years after (in 2022), 18 billion ordinary shares of BUA Foods, a subsidiary of BUA Group, were listed by introduction on the local stock exchange after obtaining relevant regulatory approvals. BUA Foods was listed at N40 per unit. On Friday, the share price of BUA Foods stood at N114.

In 2022, Geregu Power Plc listed on the NGX its 2.5 billion ordinary shares at N100 per share, under the utilities sector and electric power generation sub-sector. It became the first power generation company in Nigeria to be listed on the NGX Main Board, a listing segment for well-established companies with demonstrable records of accomplishments. The listing of Geregu’s shares added N250 billion to the market capitalisation of the NGX, further boosting liquidity in the Nigerian capital market and providing opportunities for wealth creation. On Friday, Geregu Power’s share price was N290.7.

A spate of delistings

Since 2015, the market saw increased voluntary and regulatory delistings, which include 11Plc (voluntary delisting), AG Leventis (voluntary delisting), Adwsitch, Africa Paints, Afrik Pharmaceuticals, Alumaco, Anino International, Avon Crown Caps and Containers (voluntary delisting), Beco Petroleum, Continental Reinsurance (voluntary delisting), and Costain West Africa.

The list includes Evans Medical, First Aluminium (voluntary delisting), Fortis Microfinance Bank, G.Cappa, Great Nigeria Insurance (voluntary delisting), IHS Nigeria (voluntary delisting), Investment & Allied Insurance, IPWA, Jos International Breweries, Lennard Nigeria, MTNET/Superspot, MTech Communication, MTI, and Navitus Energy.

Others are Newrest ASL Nigeria (voluntary delisting), Nigeria Wire & Cable, Nigeria-German Chemicals, Nigerian Ropes, Nigerian Sewing Machine Manufacturing, P.S Mandrides & Company, Paints and Coatings Manufacturers (voluntary delisting), Premier Breweries, Roads Nigeria, Rokanna, Seven-Up Bottling Company, Skye Bank, Stockvis, Studio Press Nigeria, Unic Diversified Holdings, Union Diagnostic & Clinical Services, UTC, Vono Products Nigeria, and West African Glass Industries.

A demutualised exchange emerged

Under Buhari’s administration, the then Nigerian Stock Exchange (NSE) was demutualised in 2021 and a new non-operating holding company, Nigerian Exchange Group Plc (NGX Group), was created. The group has three operating subsidiaries – NGX, the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulation company; and NGX Real Estate Limited (NGX RELCO), the real estate company. All the entities are duly registered at the Corporate Affairs Commission. The shares of NGX Group were listed by introduction on NGX.

“The Nigerian capital market should play a role commensurate with Nigeria’s status as Africa’s largest economy. The completion of demutualisation is a truly significant moment, and we welcome the new possibilities that have opened up for us,” Oscar Onyema, group CEO of NGX Group, said at the time.

E-Dividend Mandate Management System (E-DMMS) and other initiatives

The e-Dividend scheme has been a priority initiative for the entire capital market in a bid to curb the growth of unclaimed dividends and improve the overall efficiency of Nigeria’s equities markets. In 2015, the management of the Securities and Exchange Commission (SEC) notified the investing public that enrolment for e-Dividend payments could be efficiently conducted at bank and registrar branches nationwide through the online platform launched on July 29, 2015.

This followed the release of a circular on the implementation of e-DMMS portal by the Central Bank of Nigeria to all deposit money banks on September 14, 2015. The e-DMMS portal utilises the Document Management System of the Nigeria Inter-Bank Settlement System Plc to which completed e-Dividend Mandate Forms filled by the investor could be uploaded.

SEC introduced the regularisation of multiple accounts in 2015 where it requested all shareholders with multiple accounts to harmonise their accounts by filing e-dividend mandate forms and submitting same to their banks or stockbrokers for onward transmission to their respective registrars. This was a move aimed at ensuring the issue of unclaimed dividends was brought to an end due to the importance of dividends in maintaining and sustaining investments in the capital market.

The commission was able to ascertain the quantum of unclaimed dividends of publicly traded companies that fall within the categories eligible to be borrowed by the Federal Government. This amounted to N56.58 billion as at the first half 2022.

Amid controversy over the unclaimed funds trust fund set up by the government, Lamido Yuguda, director-general of SEC, had clarified that “this fund is not taking over unclaimed dividends of people; if at any time anybody comes up with a claim for unclaimed dividends, the fund actually has been designed to pay that claim.”

“But instead of allowing this fund to remain idle, this unclaimed fund trust fund is supposed to help in developing the country economically so that this will actually benefit both people who have this unclaimed dividend as well as other citizens who do not own them,” he added.

Read also: NGX Group grows Q1 profit by 109.0% to N310million

SEC has introduced rules on Green Bonds to promote the issuance of debt instruments for the financing of environmentally friendly projects and to provide the regulatory framework necessary for sustainability finance in Nigeria. It created a Fintech and Innovation Division dedicated to products and services rooted in information technology.

Others initiatives include the dematerialisation of share certificates; e-Dividend and Direct Cash Settlement; development and implementation of the roadmap for fintech in the Nigerian capital market; development of the Crowdfunding Regulatory Framework; and the release of new Rules on Virtual Assets Service Providers to ensure there is no loop-hole for financial crimes like money laundering through digital assets traded in the market. Recently, SEC opened the Regulatory Incubation programme for fintech firms operating or seeking to operate in the Nigerian capital market.

Passage of Investments and Securities Bill 2023

Nigeria’s capital market regulation is expected to receive a major boost following the passage into law of the Investments and Securities Bill 2023 (ISB) by the National Assembly. It had yet to be assented to by the President as of May 5.

The bill is expected to aid the functioning of the capital market and facilitate the ongoing economic diversification in the country. It empowers SEC to protect investors, adequately regulate the market to reduce systemic risks, maintain a fair, efficient and transparent market as well as provide for more stringent punishment for operators of Ponzi schemes.

The bill, which repeals the Investments and Securities Act, No. 29 of 2007 and introduces new provisions that empower SEC to collaborate with other regulatory bodies in the financial sector to manage and mitigate systemic risks as it confers new investigative and enforcement powers on the apex regulator, SEC, to effectively regulate the Nigerian capital market.