Category: Capital Market

To address the infrastructure deficit currently affecting capital markets in the West African region, there is need for a harmonised regulatory environment and smart infrastructure that will help to drive Africa’s competitiveness in the global market.

Chief Executive Officer, Nigerian Exchange (NGX), Mr. Temi Popoola stated this during the two-day Capacity Building/Sensitization program on the West African Capital Markets Integration (WACMI) Phase 2 Project in Lagos.

Popoola, who was represented by the Divisional Head, Capital Markets, Jude Chiemeka, said the WACMI Phase 2 Project is another milestone for the West African Capital Market Integration Council (WACMIC), the West Africa Securities Regulatory Association (WASRA), and indeed, the West African Monetary Institute (WAMI) on their efforts to integrate the West African Capital Markets through innovative technology.

While appreciating the African Development Bank (AfDB) for sponsoring the regional integration program in order to establish a harmonized regulatory environment for the issuance and trading of financial securities across the region, Popoola said this would help address the infrastructure deficit that severely impedes Africa’s competitiveness in the global market.

According to him, the phase II project will facilitate and stimulate cross-border securities trading, enable free flow of trading information among participants and support the creation of products and securities on the linked exchanges and drive innovation in investment services.

With the raft of evolutionary changes driven by technology, the NGX CEO stressed on the need to build capacity for Phase 2 in line with current realities and ensure market policies and guiding frameworks for the development of infrastructure and regional integration evolve and adapt to the fourth industrial revolution to ensure that Africa earns its rightful place.

“In this regard, we have to develop the complementary skills that will drive the smart infrastructure that Africa urgently requires”, Popoola added.

Earlier in an opening remark, the Director General, West African Monetary Institute (WAMI), Olorunsola Olowofeso stated that the harmonization of market rules and the capacity building and sensitization programme across the stock exchanges in ECOWAS, other activities under component I include the development and hosting of a centralized database/ website for the West African Market region.

He assured that WAMI as implementing agency of the project will continue to collaborate with all the stakeholders, particularly WASRA and WACMIC to ensure that the project is completed within the stipulated time (June 2024).

This project, he said, will help to boost investors’ confidence by providing them with robust statistical data. 

In a keynote address, Director General of the Securities and Exchange Commission (SEC) Lamido Yuguda, stated that the initiative aims to establish a common and integrated platform for listing, trading, and settling securities transactions within West Africa. Represented by the Executive Commissioner Operations at the SEC, Dayo Obisan, Yuguda stated that capital markets play the crucial role of channeling capital from the place of surplus to that of deficit, helping make production and in turn, development possible. He explained that for development to happen, a strong capital market is a requisite necessity.

“There is need to expand the markets in the sub-region, and one of the ways to do it is to encourage cross-border capital market activity. This increases the opportunity set for people in our sub-region, helps diversification of investments, and encourages transfer of skills and best practices” he stated.

• •Stocks lose N256b •Pundits optimistic on rebound

Nigerian equities buckled under a strong wave of sell orders as investors sought to monetise capital gains from a sustained rally that had seen investors accumulating more than N5.5 trillion in capital gains over the past six weeks.

With nearly three out of four transactions under sell pressure, benchmark indices at the Nigerian Exchange (NGX) indicated average decline of 0.75 per cent, representing net loss of N256 billion during the week.

Market pundits were however unanimous that the decline was a breather, a momentary profit-taking session by investors, with most expecting the market to remain resilient in the days ahead.

The recent rally, which was triggered by the inauguration of President Bola Tinubu, drove the market to 15-year high and was few points away from all-time high. It was unprecedented in the immediate period of political transition.

The All Share Index (ASI) – the value-based common index that tracks share prices of all quoted equities at the NGX, dropped from its week’s opening index of 63,040.41 points to close weekend at 62,569.73 points. The decline moderated the average year-to-date return for Nigerian equities to 22.08 per cent.

Aggregate market value of all quoted equities at the NGX also declined from its week’s opening value of N34.326 trillion to close at N34.070 trillion, a drop of N256 billion or 0.75 per cent.

The ASI, widely regarded as the main measure of the investors’ mood at the stock market, had stood at 52,973.88 points on the eve of May 29, 2023 swearing in of the new president while aggregate market value of quoted equities had stood at N28.845 trillion. The ASI and aggregate market value of quoted shares had opened 2023 at 51,595.66 points and N28.103 trillion.

Market analysts were unanimous that the decline last week was due to profit-taking transactions.

Futureview Financial Services Limited said that the “market’s downturn was primarily attributed to persistent profit-taking activities”, noting that there could be “mixed performance in the coming week”.

“Despite the weak sentiment, we anticipate market recovery in the upcoming week,” Afrinvest Securities stated.

Analysts at Arthur Stevens Asset Management said it was expected that the market would rebound from the bearish trend as “the market has proven its liquidity and the parameters for profit maximisation are available as we await second quarter earnings reports of listed companies”.

Analysts, however, urged investors to pay close attention to global indicators as well as trends in the current global situation, noting that “investors should go for stocks with strong fundamentals”.

Cordros Securities said the “bullish momentum lost steam as investors took a breather following the recent rallies”.

“With the half-year earnings season on the horizon, we believe investors will look for clues on the sustainability of the decent corporate earnings released for first quarter 2023.

“However, we expect mixed market performance in the week ahead as bargain hunting on dividend-paying stocks will be matched by intermittent profit-taking activities. Overall, we reiterate the need for taking positions in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings,” Cordros Securities stated at the weekend.

Sectoral analysis showed mixed performance with gains by oil and gas and industrial stocks counteracted by losses by influential banking, consumer goods and insurance stocks. The NGX 30 Index, which tracks the 30 largest stocks, dropped by 0.44 per cent.

The NGX Banking Index recorded the highest loss of 14.32 per cent. The NGX Insurance Index followed with a loss of 11.53 per cent. The NGX Consumer Goods Index dropped by 2.29 per cent while the NGX Pension Index, which tracks stocks adjudged acceptable for investment of pension funds, depreciated by 2.78 per cent.

Meanwhile, the NGX Industrial Goods Index rode on the back of gains by Dangote Cement to post a return of 9.01 per cent. The NGX Oil and Gas Index rallied by 1.43 per cent while the NGX Lotus Islamic Index, which tracks ethical stocks that comply with Islamic finance, recorded a gain of 0.72 per cent.

Global stock analysis showed a generally positive trend. In United States, the Dow Jones Industrial Average (DJIA) and S & P 500 rose by   two per cent and 2.5 per cent. United Kingdom’s FTSE 100 appreciated by 2.5 per cent. STOXX Europe, which tracks European markets, rose by 3.1 per cent. Japan’s Nikkei 225 inched up by 0.2 per cent while China’s SSE Index appreciated by 1.4 per cent. The MSCI EM Index, which tracks emerging markets, rose by 4.1 per cent while its twin index, the MSCI FM, which tracks frontier market, appreciated by 2.1 per cent.

At the market, there were, however, 29 gainers to 77 losers last week compared with 78 gainers and 25 losers recorded in the previous week. Champion Breweries led the losers with a drop of 31.52 per cent to close at N3.15 per share.

Academy Press and Wema Bank followed with a loss of 26.80 per cent each to close at N1.83 and N4.05. Sterling Financial Holdings Company trailed with a drop of 25.42 per cent to close at N3.11 while Fidelity Bank lost 24.97 per cent to close at N6.70 per share.

On the positive side, Daar Communications led the gainers with a gain of 50 per cent to close at 30 kobo. John Holt followed with a gain of 44.80 per cent to close at N1.81.

Deap Capital Management & Trust rose by 34.62 per cent to 35 kobo. Courteville Business Solutions appreciated by 32.84 per cent to close at 89 kobo. Golden Guinea Breweries added 32.58 per cent to close at N2.93 while Morison Industries rose by 31.02 per cent to close at N2.83 per share.

The momentum of activities also slowed down with a total turnover of 5.246 billion shares worth N63.417 billion in 57,234 deals last week, as against a total of 9.831 billion shares valued at N145.408 billion traded in 54,478 deals two weeks ago.

A breakdown of sectoral trading pattern showed that the traditional most active bank-led financial services sector remained atop activity chart with 3.494 billion shares valued at N38.032 billion in 28,633 deals; representing 66.60 per cent and 59.97 per cent of total equity turnover volume and value.

The conglomerates sector followed with 451.410 million shares worth N2.186 billion in 3,147 deals while the information and communication technology (ICT) sector placed third with a turnover of 332.705 million shares worth N5.638 billion in 4,207 deals.

The three most active stocks were United Bank for Africa, Transnational Corporation of Nigeria and FBN Holdings, which altogether accounted for 1.222 billion shares worth N15.523 billion in 8,260 deals, representing 23.28 per cent and 24.48 per cent of the total equity turnover volume and value.

African finance ministers, institutional investors, multilateral agencies, financiers, insurers and experts are expected to explore trade and investment risks in the continent and proffer ways to mitigate risks and stimulate the economy. 

At an Investor Roundtable scheduled for Rwanda, public and private sectors experts will discuss Africa’s trade and investment risks under the theme: Re-thinking Risk. Enabling Finance. This is coming against the backdrop of the continent’s economic fallout stemming from the COVID-19 scourge, the negative consequences of Russia – Ukraine war, and climate change.

The roundtable is part of the annual general meeting of African Trade Insurance Agency (ATI) holding in Kigali, Rwanda, between Wednesday  and Friday.

Chief Executive Officer,  African Trade Insurance Agency (ATI), Manuel Moses, said several countries have emerged from the global headwinds with a huge debt load, putting them at a risk of debt distress. 

“Consequently, some sovereigns have defaulted while others are struggling to service their debt and moving closer to default. Clearly, there is need for faster and innovative solutions to sustainably manage Africa’s debt problem. There is also the issue of climate change which continues to impact negatively on many African economies. Africa needs to find a right balance between its immediate development needs and mitigating climate change.

 “It’s therefore our hope that the roundtable discussions will come up with tangible solutions to these challenges and a way forward,” Moses said.

During the event, ATI is also expected to unveil its new brand identity as the organization positions itself to play a major role in the continent’s development.

 “We believe that the new brand will provide a better fit to ATI’s growing stature as the largest provider of investment and trade credit insurance on the continent with the ultimate goal of accelerating its impact on Africa’s development,”Moses said.

Finance ministers from at least 21-member countries, institutional shareholders, regional and international investors, insurers, financiers, and other governmental and non-governmental entities are expected to attend. 

Chairman of ATI’s AGM and Rwanda’s Minister of Finance and Economic Planning, Dr. Uzziel Ndagijimana, commended ATI for choosing the country to host its 23rd AGM, and noted that the Rwandan government was pleased with ATI’s support to member countries.

“Rwanda is happy to be the host of ATI’s Annual General Meeting and I would like to extend a warm welcome to our visiting guests” Ndagijimana said.

Rwanda is one of the seven countries that established ATI in 2001, alongside Kenya, Burundi, Malawi, Tanzania, Uganda, and Zambia; and has been an active member over the years.

Five of Africa’s largest banking groups have reached agreement with the Pan-African Payment and Settlement System (PAPSS) to foster more effective settlement of cross-border transactions. 

The signing of Memorandum of Understanding (MoU) Access Bank Group, Ecobank Group, KCB Group, Standard Bank Group, and UBA Group has been applauded significant partnerships that could revolutionise the settlement of cross-border transactions across Africa.

PAPSS is expected to leverage the vast network of subsidiaries and representative offices of the partners across major economic centres in Africa.

The partners said the agreements signified a step forward in the pursuit of seamless cross-border trade payments throughout the almost 40 countries covered by the banks. 

They noted that the broad collaboration between PAPSS and African commercial banks will pave the way for enhanced efficiency, transparency, and reliability in intra-African settlement.

According to the partners, the adoption of PAPSS’s cutting-edge settlement model will streamline operations and empower businesses by providing a secure and technologically advanced platform for cross-border transactions.

As part of the partnership, Access Bank Group, Ecobank Group, KCB Group, Standard Bank Group, and UBA Group will collaborate closely with PAPSS to ensure the integration of PAPSS into their systems. 

This collaborative effort will include opening up all their African footprints for PAPSS, facilitating settlement of transactions, encouraging the participation of fintech in PAPSS through the banks and expanding PAPSS to the banks’  digital channels such as mobile app banking and e-banking.

President, Afreximbank, Prof. Benedict Oramah said the agreements marked remarkable steps towards the realisation of the aspirations of Africa’s foreleaders, who envisioned the creation of a payment and clearing union about six decades ago. 

“It also draws us closer to domesticating cross-border payments by enabling payments for cross-border trade in African currencies while strengthening African currencies. By leveraging on the vast continental coverage of these African commercial banks, PAPSS will seamlessly facilitate cross-border trade and payments and boost intra-African trade and investments,” Oramah said.

Secretary General, AfCFTA, Wamkele Mene said the introduction of the new PAPSS model for onboarding African commercial banks and the signing of the MoUs with the five banks  signified a bold step towards the full operationalisation of PAPSS for the benefit of African traders and SMEs in the implementation of the AfCFTA Agreement.”

Chief Executive Officer, PAPSS, Mr Mike Ogbalu III, expressed enthusiasm about the collaborations.

According to him, by embracing PAPSS’ commercial bank settlement model, the banks are helping to build a robust continental platform for fostering cross-border payments, thereby paving the way for financial inclusion and substantial continental economic development.

The MOUs will be put into effect gradually in partnership with central banks in the countries where the five banks operate.

To ensure that more Nigerians are educated on the activities of the capital market and thereby developing it and attracting more investors, Securities and Exchange Commission (SEC) is set to hold an awareness programme tagged “Investor Safety” for the officers of the Federal Road Safety Corps (FRSC) across the  federation.

The event, which is the third in the series of sensitising officers of the FRSC is to hold on July 5, 2023 in Enugu, Lagos, Osun, Port Harcourt and Benin.

According to a statement by the SEC, the officers would be exposed to knowledge on investments available in the capital market, identifying and avoiding Ponzi schemes, the roles and functions of the SEC, Non-Interest Finance, and complaints management framework.

“The Commission is organizing the event in collaboration with the Fund Managers Association of Nigeria (FMAN) to also expose the Officers to legitimate channels of investments and the Association of Dealing Houses of Nigeria (ASHON) to address issues that relate to investments and unclaimed dividends and other related matters.

“This enlightenment programme is part of our commitment to developing the capital market, appraising investors of the products available in the market as well as our functions and roles in restoring investors’ confidence” SEC stated.

The first tranche of the programme was held on November 30, 2022, at the SEC Head Office Abuja for the Abuja Sector Command of FRSC with over 50 officers in attendance. Participants shared experiences on their investments in the capital market pre-2008 meltdown and on Ponzi schemes.

On May 9, 2023, the second phase of the programme was organised for other officers in six (6) Formations of the Corps which are in Adamawa, Plateau, Kaduna, Sokoto, Kwara and Bauchi States.

Investors in banking stocks may earn higher returns than several other investors as banks harness the benefits of the cancellation of the multiple foreign exchange (forex) rates by the Central Bank of Nigeria (CBN).

Analysts at Coronation Asset Management said banking stocks might repeat the 2017 scenario when forex rates convergence stimulated the performance of banking stocks.

“Bank stocks performed well in 2017 and we think that they will perform well again in 2023, given that most of the major listed banks hold net long positions in United States dollars and will report translation gains.

We also think there is a chance that bank regulations affecting naira liquidity will be eased,” Coronation stated.

Analysts noted that there were also many differences with 2017 pointing out that by mid-2017 the economy was emerging from a five-quarter recession and the appreciation in the parallel exchange rate improved business conditions. 

Analysts added that foreign investor was still a significant factor in the Nigerian equity market in 2017; much less now, although recent data showed a net inflow of foreign investment into the stock market.

They noted that the monetary authorities were also able to engineer market interest rates  above the rate of inflation, something to which investors usually respond positively “@This begs one question about the second half of 2023. Which way are interest rates going to move? A liberalised foreign exchange rate points to elevated interest rates in order to make it worthwhile holding money in naira. Fuel subsidy removal, effective May 31, 2023 suggests that cost pressures will push inflation upwards, which also argues for elevated interest rates. Against this, the All Progressives Congress (APC) manifesto proposed low interest rates to encourage economic growth. We do not know, at this stage, how the  APC administration and the Central Bank of Nigeria will resolve this critical area of policy.

“On the bright side, the removal of fuel subsidies and the liberalisation of the naira foreign exchange rate are historic events, and will themselves straighten out much of the dysfunctional economic behaviour we have become accustomed to,” Coronation stated.

Analysts said the reforms by the President Bola Tinubu administration ”are good for the economy and in the long run are good for markets”.

Drawing up a model equity portfolio, analysts included overweight for banking sector which they believed would benefit from liberalisation of foreign exchange rates, given that most of that large listed banks have net long positions in dollars. 

According to analysts,  it is also possible that some of the very restrictive banking regulations affecting naira liquidity in banks may be unwound by the new administration, given its pro-growth stance.