Boom For Investors As Capital Market Records N2.21trn Profit
From Udo Onyeka, Lagos:
In spite of the lull in the nation’s economy occasioned by the prevailing recession, portfolio investors appear to be smiling off as the nation’s capital market posted serious signs of boom by end of first half year (H1).
Transactions on the floor of the Nigerian Stock Exchange(NSE) for the first half beginning January 3-June 30, 2017 showed a return on investment of N2.205 trillion, statistics at the NSE showed.
For the nation’s foreign reserves however, the story was not as rosy, as the capital market as reserves dip in the Month of June by 0.36 per cent against the figure in May to keep the nation’s foreign reserves at the $30.25 billion.
In line with the profit recorded on trading activities, the NSE’s All-Share Index (ASI) also improved with additional 6,242.86 points, representing 23.23 per cent growth to close at 33.117.48 absolute points as at the close of the second quarter on June 30.
Similarly, market capitalization rose to 23.85 per cent within the six month-trading period to stand at N11.452 trillion.
Analysts were upbeat with the results given the fact that trading activities in the preceding year commenced on the negative record, when the ASI and market capitalisation closed on the red territory by -7.53 per cent and -6.13 per cent respectively.
They attributed the impressive performance recorded within the period to the recent initiatives taken by the Central Bank of Nigeria (CBN) to address scarcity of foreign exchange (forex) among other factors.
Chairman, organising committee on national workshop of the Chartered Institute of Stockbrokers (CIS), Alhaji Umaru Kwairanga, was excited that the capital market has been on a rebound in 2017, especially, from the end of the first quarter till now.
Operations at the capital market started on a sound note in the first quarter of the year but suddenly went bullish by the second quarter sending fears down the spines of investors. The bourse however, bounced back leading to the positive performance shown by end of H1.
“Activities in Q1 ended negative by -6.56 per cent, investors’ confidence returned gradually in Q2 to close the quarter higher by 29.79 per cent which brought the Yea-to-Date (YtD) return on the equities index to 23.23 per cent,” a commentator said.
The boom recorded in the capital market translated to increased prosperity to Nigerian investors since their foreign counter parts did not take full position in the market. It would be recalled that foreign investors beat a retreat from the NSE as a result of foreign exchange scarcity which pushed the naira down to exchange at over N400/$ before the CBN intervened with fresh measures to inject more forex into the system, a development which forced down the foreign the exchange rate of the naira.
“Participation in our capital market has been slightly skewed in favour of foreign portfolio investors for most of the past decade and this category of investors refused to participate in the Nigerian capital market while the forex issues persisted,” Kwairanga stated.
Analysts were hopeful that the market would post even better results in the H2 given some policies and measures being adopted by the government especially the ease of doing business initiatives for which Acting President Yemi Osinbajo recently issued an administrative order to bring it to effect.
Nigeria’s Foreign Reserves Stand at $30.25bn
Although the foreign reserves came down a bit from the May level at $30.25billion by June 30, the reserves also showed a 14.8 percent rise from Nigeria’s foreign exchange reserve of a year ago, when the reserves stood at $26.34 billion. The rise this year has been as a result of the rise in global oil prices.
The country’s reserves added $4.2 billion since the beginning of the year as they stood at $26.09 billion at the beginning of 2017.
In April the forex reserves rose to $30.8 billion, making it the highest level since September 2015 till April 2017. That increase was attributed to a recent rise in global crude oil price, and proceeds of the country’s Eurobond, issued in March.
CBN data showed that Nigeria’s forex reserves, stood at $30.31 billion, in March.
The country’s reserves have risen from where they were in January, but are still far off the peak of $64billion, achieved in August, 2008.
The reserves have experienced a steady day-on-day increase of between 2.30 and 2.75 per cent since January 5, 2017.
The last time the reserves crossed the $30 billion mark was in July 2015 before it began to decline.
The reserves were affected by low crude oil prices across the world, which reduced the availability of foreign exchange and in turn, put pressure on the naira.
A production cut agreement between OPEC and non-OPEC members in the early part of the year led to an upsurge in crude oil prices, which in turn have benefitted the reserves.
Since February 2017, the Central Bank of Nigeria has been providing foreign exchange to banks to meet the tuition, travel and medical needs of customers and even manufacturers thereby reducing the pressure on the naira.