Bullish headwinds
Nigeria’s stock market is closing as one of world’s three best-performing markets in a year that saw the capital market as a sustained shining star in a sky clouded by several uncertainties. At home and abroad, the debt market was decisive in the national management, as reforms’ gaps moderated fiscal expectations. The recapitalisation in the banking sector enlivened the primary equities market, providing balancing stimulus for the debt market. But companies remained under pressure from hangovers of fiscal and monetary reforms. DEPUTY GROUP BUSINESS EDITOR, TAOFIK SALAKO reports
The benchmark index for the Nigerian stock market opens today with average year-to-date return of 36.59 per cent, one of the three highest returns globally. With the stock market trading above its psychological mark of 100,000 index points and market capitalisation of about N62 trillion, pricing indices provide a summative view of the capital market in 2024.
The All Share Index – the value-based, common index that tracks all share prices at the Nigerian Exchange (NGX), in its fifth consecutive positive return, underlines the positive sentiments that have characterised both the primary and secondary segments of the debt and equities markets. Amidst the tough-biting macroeconomic reforms, capital market indices have remained upbeat, a sort of alternative window that cushions the phasing pains of economic shifts.
With more than N1.5 trillion estimated to have been raised by banks in the first cluster of the ongoing banking recapitalisation, successive oversubscriptions of the government’s debt issues showed a resilient market. But with government’s debt issue successes came with national debt build-up, with debt-to-Gross Domestic Product (GDP) overshooting by nearly 20 basis points.
Nigeria’s first Eurobond in more than two years, a $2.2 billion, two-tenored, mid-to-long term instrument, was oversubscribed by 300 per cent, garnering more than $9 billion from a diverse global investors of fund managers, banks and other financial institutions. The global market was a replay of the domestic foreign investment inflows, in a year that saw a strong rebound across several segments of foreign inflows.
Foreign portfolio investments (FPIs) more than doubled this year, supporting Nigeria’s market to its highest turnover. By November 2024, total FPI transactions stood at N785.28 billion, 116.5 per cent above N362.75 billion recorded in the comparable period of 2023. This, with the continuing bullish demand from the domestic investors, pushed total transactions at the equities market rose by 51.9 per cent by November 2024 to N4.91 trillion as against N3.23 trillion recorded in the comparable 11-month period in 2023.
Besides, total inflows into the Nigerian foreign exchange (forex) market reached a new threshold of $4.05 billion by November 2024. The surge was particularly driven by inflows from foreign sources, which jumped to its highest level in nearly five years.
Reports have shown increasing uptick in forex inflows with a successive monthly improvement. Total inflows rose from $3.04 billion in October 2024 to $4.05 billion in November 2024, representing an increase of 32.9 per cent. Nigerian Autonomous Foreign Exchange Market (NAFEM) data, obtained from the FMDQ Securities Exchange, had shown improved inflows from domestic and foreign sources, providing a steady mix for the stability and liquidity that have characterised the forex market in recent period.
A breakdown indicated that inflows from foreign sources rose by 26 per cent from $1.36 billion in October 2024 to $1.71 billion in November 2024, its highest level since January 2020. The increase in inflows from foreign sources was driven by substantial inflows from foreign portfolio investors and other corporates, which rose by 39.9 per cent and 43.9 per cent respectively.
Inflows from local sources also rose by 38.5 per cent from $1.69 billion to $2.34 billion, driven by inflows from the Central Bank of Nigeria (CBN) and non-bank corporates, which rose by 27 per cent and 56 per cent respectively. Inflows from individuals and exporters however fell by 88.5 per cent and 63.5 per cent respectively.
The ongoing banking recapitalisation shaped out to an early success, mitigating fears of any pronounced negative consequences. Nigeria’s premier and largest non-interest bank, Jaiz Bank Plc achieved the new minimum capital requirement stipulated by the Central Bank of Nigeria (CBN) after securing regulatory approval for a new N10.4 billion equity funds. With the clearance from CBN, Securities and Exchange Commission (SEC) and Nigerian Exchange (NGX), the listing of the N10.04 billion raised through a private placement pivoted the non-interest bank beyond the June 2026 deadline.
Also, Access Holdings Plc successfully raised N350.96 billion to surpass the new minimum capital requirement of N500 billion stipulated for international commercial banking licence by the CBN. This followed full regulatory approvals from the CBN and SEC for the bank’s rights issue of 17.77 billion ordinary shares of 50 Kobo each at N19.75 per share. As at the third quarter 2024, Access Holdings had share premium and share capital of N251.81 billion. With the new equity funds, the company now has share premium and share capital of N602.8 billion, N102.8 billion above N500 billion stipulated by the CBN under the ongoing recapitalisation exercise.
The CBN also approved the business combination between Unity Bank and Providus Bank, the first mergers and acquisition deal under the ongoing banking recapitalisation. This also highlighted other major mergers and acquisition deals in the market including Oando’s $783 million acquisition of the Nigerian Agip Oil Company (NAOC) from the Italian Energy firm Eni. The deal was adjudged ‘Deal of the Year’ by the Africa Energy Week (AEW) 2024, a recognition usually given to the most transformative and impactful deal in the energy sector. Seplat also concluded its acquisition of ExxonMobil, another highlight after the indigenous energy company that accounts for about 25 per cent of the country’s gas-to-power supply pulled a $1 billion turnover. The commissioning of Seplat’s ANOH Gas Processing Plant during the year was also a key driver for the performance of the oil and gas stocks, which are outrunning the global returns with average return of about 160 per cent.
Access Holdings particularly recognised the impact of a digital innovation at the primary segment of the capital market. The launch of the NGX Invest, the electronic offering platform promoted by the NGX, during the year had considerable positive impact on the ease of offering at the market. The NGX Invest provides investors with a seamless, efficient, and convenient subscription experience, significantly reducing barriers and democratising participation in new issues.
The new digital platform is at the core of NGX Group’s digital strategy designed to streamline the distribution of securities in the Nigerian capital market. Its user-friendly interface allows investors to onboard seamlessly and verify their identities through the Nigeria Inter-Bank Settlement System (NIBSS), using their Bank Verification Number (BVN). With NGX Invest, the traditionally complex and time-consuming process of investing is reduced to a few clicks, making it easier for investors across Nigeria, including those in underserved areas, to participate in the capital market.
The reconstitution of the board of SEC by President Bola Tinubu appeared to have set a new tempo for capital market regulation. The new board and management of SEC included Mr. Mairiga Katuka, Chairman; Dr. Emomotimi Agama, Director-General; Frana Chukwuogor, Executive Commissioner, Legal and Enforcement; Mr. Bola Ajomale, Executive Commissioner, Operations; Mrs. Samiya Hassan Usman, Executive Commissioner, Corporate Services while Mr. Lekan Belo and Mr. Kasimu Garba Kurfi were appointed as Non-Executive Commissioners. For the new SEC management, the main thrust of the market is the $1 trillion economy agenda, with the capital market as the linchpin to achieve the ambitious national agenda.
Three major listings highlighted the market’s continuing attraction, including the listing of Transcorp Power Plc, Aradel Holdings and Haldane McCall Plc. However, the delisting of GlaxoSmithKline Consumer Nigeria, Arbico Plc and Flour Mills of Nigeria, all voluntary delisting proved the underbelly of the market. Altogether, 2024 is a year of more wins than losses for the capital market.
