…thrives on low stock prices
Despite the ravaging Coronavirus pandemic, the stock market returned to positive route in Q2 as investors leveraged low prices of stocks. Chris Ugwu writes
The Nigerian stock market, which closed negative during the first quarter of 2020 with a loss of about N1.858 trillion or 21 per cent, bounced back in the second quarter with a gain of about N1.669 trillion or 15 per cent as investors leveraged low prices of stocks.
Available statistics showed that activities on the Nigerian Stock Exchange, which opened second quarter trading at N11.100 trillion in market capitalisation and 21,300.47 in index at the beginning of trading on April 1, 2020, closed the second quarter of the year on June 30, 2020 at N12.769 trillion and 24,479.22 index points, hence earning a quarter to date gain of about N1.669 trillion or 15 per cent year to date The growth in market capitalisation, which was recorded in second quarter 2010, was due to positive sentiments by investors following activation of business continuity process and other innovations by the Securities and Exchange Commission and the Nigerian Stock Exchange.
Market analysts believed the renewed sentiment in the local bourse had also grown following the crave to increase capital gains on the back of low prices of stocks owing to upset in the financial market arising from the pandemic and sharp drop in oil price. Market observers agreed that the decline witnessed in the Q1 that made prices of many stocks miserable attracted investors in the Q2.
SEC’s investor data, consent form
In a bid to address challenges associated with identity management in the capital market, the Securities and Exchange Commission, SEC, during the quarter developed a standardised Investor’s Data and Consent Form to be adopted by all capital market operators. Identity theft is the deliberate use of someone else’s identity, usually as a method to gain financial advantage or obtain credit and other benefits in the other person’s name, and perhaps to the other person’s disadvantage or loss.
The form will assist CMOs in collecting and updating investors’ data as well as enable CMOs to obtain consent of investors for implementing capital market initiatives targeted at improving overall experience and participation in the market. Acting DG of SEC, Ms. Mary Uduk, who disclosed this in an interview in Abuja, said identity management had been a problem not just in the capital market but in many sectors of Nigeria’s economy, but assured that SEC was handling it.
“We are handling it, and that is why we came up with that form, that form has been exposed and we have asked the capital market operators and other stakeholders to give us their comments on that form. “We want to get as much information as we need from investors to be able to use it in the right way while also protecting that information,” she noted. The Acting DG expressed the commitment of the commission to identify investors properly so as to guard against flow of illicit funds into the capital market.
She said: “We need to identify our investors, we need to know who is putting money in our market and who is not. That will also help us to take care of money laundering and other vices and people we don’t want in our market. “That form is out there and we expect every stakeholder to look at it and make comments and other capital market operators so that we can use it to get information from investors and that information would be stored in database protected under the law and used to ensure that we have unique identifier investors.
“For example, years ago, before the global financial crisis, there was lack of good identity management in the market and that made it easy for some people to buy stocks using multiple identities when companies were doing IPOs at that time.
“What has happened now is that we find it difficult to reconcile ownership of these stocks. That is why we have a window open right now for people who got stocks in multiple identities to regularise them.” Uduk, however, warned that the SEC would no longer tolerate investors buying stocks in fake names, terming it as illegal. She added that the window of opportunity was still open for such investors to regularise their accounts at no penalty, saying that the identity management would assist in ensuring that it does not happen in the future.
NSE, FMDQ raising capital
The Nigerian Stock Exchange and the FMDQ Securities Exchange has continued to deliver on its commitment to provide a platform for issuers to raise capital even in the toughest of times. The activation of its Business Continuity Plan saw the transition to remote trading and working from home.
The NSE has attracted several new listings to the market, the most recent being LAPO Microfinance Bank’s N6.2 Billion Bond on Monday, 29 June 2020. This listing came closely on the heels of the listing of Dangote Cement’s N100 billion bond on Friday, 26 June, 2020, which is the largest corporate bond issued in the Nigerian debt capital market. During this period of remote trading, the exchange has helped corporates and government raise capital to the tune of over N968 billion, ranging from new and supplementary bond listings to rights issues, private placements and Exchange Traded Funds (ETFs). These funds have been utilised to pay down financial obligations, support working capital, improve infrastructure development and facilitate business expansion.
FMDQ Securities Exchange Limited (FMDQ ) had also recently admitted for listing, the Dangote Cement Plc N100.00 billion Series 1 Bond under its N300.00 billion Bond Programme, and for quotation, the MTN Nigeria Communications Plc N100.00 billion Series 1 & 2 Commercial Paper (CP) notes under its N100.00 billion CP Issuance Programme, both on the Exchange’s platform.
In the same vein, FMDQ, through its central securities depository, FMDQ Depository Limited, also won the mandate as the sole depository for the lodgement of the MTN Nigeria CP notes, in addition to being a joint depository for the Dangote Cement Bond.
In a recent interview, the Chief Executive Officer, NSE, Mr. Oscar Onyema, had said: “The NSE is resolute in its commitment to be a trusted business partner to all our Issuers in accessing right-sized capital and achieving their strategic business objectives.
“In our efforts to fulfil this mandate, we have achieved all-round increased efficiency in terms of competitive pricing structures, increased turnaround time, enhanced customer experience and improved time to market. “We believe this has translated into the remarkable resilience we have displayed amidst this pandemic, as well as increased investors’ confidence as reflected in stakeholders’ participation in our market across various asset classes.”
Speaking on this great achievement, the Chief Executive Officer of FMDQ Group, Mr. Bola Onadele. Koko, expressed his delight on the admission of these securities to FMDQ Exchange and FMDQ Depository, and the wider implication for the market. According to him, “the market has been yearning for corporate benchmarks for pricing and valuation of securities in the debt capital market, and coming at a time when the resilience of the Nigerian financial market is being tested by the impact of the COVID-19 is even more commendable.
“The success of these issuances by the premier and largest business conglomerate in Africa, Dangote Industries, through its subsidiary, Dangote Cement Plc, and the debut made into the Nigerian DCM by leading telecommunications giant, MTN Nigeria Communications PLC, lay credence to the untapped and great potential of the Nigerian capital market to support sustainable development in Nigeria, and the confidence of investors, as well as the commitment of FMDQ Group to empower the markets to deliver prosperity to Nigeria and Nigerians.”
SEC DG, commissioners
The Senate during the period under review confirmed the appointment of Mr. Lamido Yuguda as Director-General of the Securities and Exchange Commission (SEC). Also confirmed alongside Yuguda are three executive commissioner nominees; Mr. Reginald Karawusa, Mr. Ibrahim Boyi, and Mr. Temidayo Obisan.
Their confirmation followed the submission of the report of the Committee on Capital Markets, which was presented before the Senate by the Chairman, Senator Ibikunle Amosun. Amosun, in hIs presentation, said the nominees were experienced and suitable for the job and therefore recommended their confirmation. President Muhammadu Buhari had asked the Senate to confirm Yuguda as the new Director-General of SEC. The president also sought confirmation of Karawusa, Boyi and Obisan as full-time commissioners of the vommission.
President of the Senate, Ahmad Lawan, speaking after the nominees were confirmed, tasked SEC to ensure efficiency in the discharge of its duties so as to attract local and foreign investments to the country. The Senate President said: “The Securities and Exchange Commission must be efficient and effective in ensuring that we are able to attract and sustain not only domestic investment but foreign direct investment. “People should bring their monies and feel safe with their investments here. This is essential to create the very enabling climate for investors to be attracted and retained here in the country.”
The depreciation witnessed in Q1, where most stocks hit their record lows, offered attractive entry opportunities for discerning investors to leverage on in the second quarter.