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Investors Lose N546.2b in First Half

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  • Investors Lose N546.2b in First Half

Investors in Nigerian equities suffered average depreciation of 4.66 per cent in their portfolios during the first half of this year. This is equal to a net loss of N546.2 billion during the six-month period.

This extended the losing streak at the market over the past 18 months to a net loss of N3 trillion or an average decline of 22.5 per cent.

Benchmark index showed that Nigerian equities traded mostly negative during the period, declining in four of the six months. The market also closed both the first and second quarters on the downside.

The All Share Index (ASI) – the main value-based index that tracks share prices at the Nigerian Stock Exchange (NSE) – closed June 2019 at 29,966.87 points – indicating an average decline of 3.55 per cent, 3.46 per cent and 4.66 per cent for June, the second quarter and half-year.

The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. It had, however, rallied a world-leading gain of 42.30 per cent in 2017.

Most analysts remained cautious of the outlook for the equities market in the immediate period, although most investment pundits agreed attractive valuations, steady corporate earnings and stable macroeconomic situation hold significant medium to long-term values for Nigerian equities.

“Our outlook for equities in the short to medium term remains conservative, amidst the absence of a positive catalyst,” Cordros Capital stated at the weekend.

Ibadan Zone Shareholders Association (IBZA) Chairman Eric Akinduro, blamed political tension and related slowdown and macroeconomic uncertainties for the performance of the market in the first half. Nigeria had its general elections in the first quarter, during which President Muhammadu Buhari was re-elected. However, the main opposition candidate and former vice president, Alhaji Atiku Abubakar of the Peoples Democratic Party (PDP) is still challenging the election results at the tribunal.

According to him, the first half performance was far below expectations mainly due to pre- and post- election tensions.

“The economy was full of uncertainties, the political climate was volatile, insecurity and unrest and many more challenges contributed to the poor performance. Companies were not sure of what government policy would be, there was no definite business-oriented policies that could have helped the market,” Akinduro said.

He said the negative trend might continue for awhile because the economy has not shown any serious positive sign.

While commending the government for the success of its foreign exchange management, Akinduro said it needs to do more to create enabling environment for companies to operate and deliver better results, which could stimulate the market.

The unabsorbed impact of the listing of Nigeria’s largest telecoms company, MTN Nigeria Communications Plc, in May 2019 however, coloured the market capitalisation with a resemblance of gain.

The NSE listed 20.35 billion ordinary shares of MTN Nigeria at N90 per share, representing initial listing value of N1.83 trillion. The new listing and subsequent rally rallied the market capitalisation to a gain of N2.726 trillion in May 2019, one of the two months that ended positive. The other positive month was in February.

With the MTN effect, aggregate market value of all quoted companies on the NSE closed first half at N13.206 trillion, implying a gain of N1.49 trillion during the first half. Market capitalisation of equities had opened 2019 at N11.721 trillion. It had opened 2018 at N13.609 trillion.

Based on market values, the ASI and market capitalisation are correlated indices and without new listing or delisting, usually move simultaneously in the same direction. But the ASI is weighted, and as such adjusted for the new listing while the market capitalisation is a straight-line summation of share prices and issued shares. Thus, where the ASI and market capitalisation differ, the ASI is widely regarded as the true representation of the market condition.

The market started the year with a loss in January, rallied to appreciable recovery in February and relapsed into negative again in March. It continued on the bearish side in April before the MTN Nigeria’s listing provided a breather in May and then relapsed again in June.

Nigerian equities lost N326 billion in January, with average decline of 1.82 per cent. The ASI and market value of equities had closed January at 30,557.20 and N11.395 trillion. In February, investors in Nigerian equities netted N433 billion in capital gains as the stock market staged a major recovery. Average return for the month stood at 3.80 per cent. The ASI and market value of quoted equities had closed February higher at 31,718.70 points and N11.828 trillion. The market rounded off the first quarter with a net loss of N156 billion and average decline of 2.135 per cent in March 2019.

The market suffered a major contraction in April as the bearishness defied earnings reports and dividend recommendations. Quoted equities lost N714 billion in April. The ASI dropped from April’s opening index of 31,041.42 points to close the month at 29,159.74 points, representing average month-on-month decline of 6.06 per cent. Aggregate market value of all quoted equities also dropped from the month’s opening value of N11.672 trillion to close at N10.958 trillion.

In May, aggregate market value of all quoted companies at the NSE closed at N13.685 trillion, N2.726 trillion above the opening value of N10.959 trillion for the month. The gains of N2.726 trillion included entry listing value of N1.83 trillion added by the listing of MTN Nigeria. The May rally moderated the negative average year-to-date return, which had opened the month at -7.22 per cent, to -1.15 per cent for the five-month period.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

NAIC Pays N1.7bn Claims to Farmers

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The Nigerian Agricultural Insurance Corporation (NAIC) said it paid a total of N1.7 billion claims to over 5,000 farmers in the past two years.

NAIC, which is the only federal government owned insurance company authorised to offer agric insurance services to farmers at subsidised rate, said a breakdown of the paid claims showed that it paid N856 million to insured farmers in 2019 and N848 million in 2020.

Commenting on the development, NAIC Managing Director, Mrs. Folashade Joseph, said the claims were paid to the farmers to cover losses incurred in the course of doing business.

Joseph, enjoined agricultural investors and lending institutions to continue to partner NAIC by taking agricultural insurance cover that will enable them remain firm in business despite unforeseen circumstances from weather conditions and other risks in order to realise the food security agenda of President Muhammadu Buhari.

She said the above-mentioned amount was shared among five million farmers who suffered various setbacks in their farms as a result of natural course.

According to her, the NAIC Agric Insurance Scheme was launched in 1987 by federal government to restore the confidence and productivity of Nigerian farmers who suffered losses as a result of natural disaster such as flood, drought, pest and diseases.

The NAIC boss explained that the essence of the sensitisation campaign embarked by the corporation was to let the farmers know and understand exactly what NAIC does, the importance of insurance, and make them understand how insurance works, how they can access NAIC products and services, how to process their claims, as well as what insurance stands to do for them.

“Agribusiness is evolving fast and so many risks are being thrown up, many new participants are coming into the business of agriculture, and the risks are on the increase if you look at them across the value chain, there is no so many participants so we need to keep sensitising the farmers and let them know we are serving them, and we need to know from them how to serve them,” she explained.

Speaking further, she said, “our assurance to farmers is that when they are insured and they suffer losses covered by any of the policies they purchased, including natural disasters and whatever, they will get paid for their losses, and that is the purpose of insurance and setting up NAIC.

“Our motor is ‘Plowing the Farmer Back to Business, Plowing the Farmers into Prosperity’, and we settle claims.”

She said NAIC currently deals with thousands of farmers (Small, Medium, and Large scale farmers) across the country, adding that the corporation serves farmers with investment as little as N100, 000, and at the same time serves multinational farmers.

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Banking Sector

UBA Organises Capacity Building Forum

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As part of its commitment to support the growth and sustainability of micro, small and medium-scale enterprises (MSME) in the continent, the United Bank for Africa (UBA) Plc, is set to organise the next edition of its UBA Business Series.

The UBA Business Series which is a monthly event, is an MSME Workshop as well as a capacity building initiative of the bank where business leaders and professionals share well-researched insights on best practices for running successful businesses, especially in the face of the difficult operating environment that dominates the African business landscape.

Through this initiative, UBA has been assisting with essential tips to help businesses re-examine their models and strategies and ensure that they stay afloat and remain thriving, a statement from the bank explained.

The topic for the next edition of the series is, “Managing Performance for Business Growth,” and it will be held today, via Microsoft Teams.

At this session, the Managing Director, Secure ID Limited, Mrs Kofo Akinkugbe, will be sharing useful tips and insights on the key strategies of performance management to boost business growth.

Akinkugbe is the founder of SecureID Nigeria, a MasterCard, VISA and Verve certified Smartcard Personalization Bureau and Digital Technology company. She currently serves as the Managing Director/CEO, Secure Card Manufacturing, – a Smartcard manufacturing plant producing high security identity cards and documents for the Banking, Telecoms and Public sectors across Africa and beyond.

UBA’s Head, SME Banking, Sampson Aneke said of Akinkugbe, “with her vast experience garnered over the years from various sectors, she will help business owners understand how performance management strategies can be effectively implemented to ensure business growth.”

He emphasised UBA’s commitment and deep passion for small businesses, which according to him, remains the engine of any developing economy adding, “We know small businesses are the backbone of the economy in every country. In many climes, businesses with fewer than 100 employees account for 98.2 per cent of all businesses. This no doubt captures the importance of SMEs to a thriving economy which is why UBA is committed to seeing them flourish.”

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Banking Sector

CBN to Extend Credit Risk Management System to OFIs

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In an effort to curb growing bad debt, the Central Bank of Nigeria has said it will extend its Credit Risk Management System to Other Financial Institutions (OFIs) operating in Nigeria to protect them from bad debtors.

According to the apex bank, this is important following the successful implementation of the credit risk system in other lending institutions operating in Nigeria.

The bank disclosed this in a circular titled ‘Credit Risk Management System: Commencement of enrolment of all Development Finance Institutions, Microfinance Banks, Primary Mortgage Banks and Finance Companies’ and signed by Kelvin Amugo, the Director, Financial Policy and Regulation Department, on Monday.

In part, the circular read, “As part of efforts to promote a safe and sound financial system in Nigeria, the CBN introduced the CRMS to improve credit risk management in commercial, merchant and non-interest banks as well as to prevent predatory borrowers from undermining the banking system.

“With the successful implementation of the CRMS in deposit money banks, it has become expedient to commence the enrolment of Other Financial Institutions on the CTMS platform.

“Accordingly, all DFIs, MfBs, PMBs and FCs are required to report all credit facilities (principal and interest) to the CRMs and to update same on monthly basis.

“OFIs shall note the Bank Verification Numbers and Tax Identification Numbers are the only basis for regulatory renditions”.

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