To strengthen confidence in the capital market, there is need to reassure investors of a credible 2023 election, RHODA OGUNSEYE writes
From all indications, the Nigerian stock market has continued to defy increased political activities in the country as momentum gathers towards the 2023 general elections, insecurity and economic instability to record growth.
Between January and May 2022, the total value of domestic and foreign transactions on Nigerian Exchange Limited (NGX) recorded a total sum of N1.506 trillion. This figure shows N933.65 billion higher than the total transactions carried out by both domestic and foreign investors in the corresponding period of 2021. According to the NGX Regulation Limited, the Domestic and Foreign Portfolio Investment (FPI) May 2022 report captured these transactions as well as trading figures from market operators. Despite rising inflation and volatility in foreign exchange, which remains one of the key drivers of the domestic and foreign portfolio investment, domestic investors have continued to hold ground on the floor of NGX. Foreign transactions stood at N201.29 billion, accounting for about 13.37 per cent of the total transactions carried out from January to May, while domestic transactions constituted N1.304 trillion, representing 86.63 per cent of the total transaction, outperforming foreign investment during the same period. However impressive the performance is, the assurance of the electoral empire, the Independent National Electoral Commission (INEC), to conduct a free, fair and credible elections is crucial to deepening confidence in the capital market.
Lessons from Osun
President Muhammadu Buhari, while congratulating the governor-elect of Osun State, Senator Ademola Adeleke, following the victory of the candidate of the Peoples Democratic Party (PDP) in the justconcluded election, said that the will of the electorate must always prevail. A statement from the Presidency said: President Buhari notes that the successful conduct of the election is further testimony to the maturity and commitment of all stakeholders — the electoral body, security agencies, political parties, the media, civil society, and the electorate — to further strengthen the integrity of the electoral process in the country. “The president reassures the nation that the commitment of this administration towards having credible elections remains unshaken.”
Commenting on developments around the market, Boniface Okezie, the National Chairman of Progressive Shareholders Association of Nigeria, said: “In the first half of the year, the market was going up, now, in the second half, the market has began to nosedive after profit taking, the shares loosing gains acquired in the past. It is expected because people are taking profit and don’t forget we are entering into electioneering campaign at this period in time that will change a lot of things positively or negatively.” Okezie said the market may not continue the upward movement as investors are sceptical as they play wait and see game. “I believe after taking a lot of profits from companies that have given dividend, waiting for a few others, the bearishrun will persist to the election campaign period, which is expected to kick-off in September of 2022,” he added. He said market had been so good so far, surprisingly, to a large extent. Okezie said: “The market is expected to nosedive year-end, when the electioneering must have begun to heat up as foreign investors will likely exit the capital market and the country pending the outcome of the 2023 general elections. Except INEC gives us concrete assurance that things will go right, maybe if the situation with the conduct of the Osun State trend continues, it will help stabilise the market.”
Resilience of the capital market
The Chairman, Nigerian Exchange Limited, Mr Abubakar Mahmoud, had said it was enhancing the listing experience for companies and providing useful insights to prospective companies. He said this during the NGX CEO Roundtable with the theme: ‘Creating the enabling ecosystem for accessing capital from the Nigerian capital markets.’
At the event held virtually, stakeholders in the capital market addressed and proffered solutions to the challenges faced by issuers in raising capital in the market. He said: “We convened this roundtable with the ultimate objective of enhancing the listing experience for listed companies and providing useful insights to prospective companies.
“NGX, as Nigeria’s premier securities exchange, remains strategically positioned to support the aspirations of its stakeholders and the Nigerian economy as a whole and we believe the deliberations from the panel sessions will help us improve our operations and offerings in listings experience, market development, advocacy, and investment opportunities.” Giving the keynote speech, the Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, said that the Federal government was working diligently to improve the economy through diversifying the economy and strengthening institutions and structures.
“As more of our startup companies grow and mature, we must ensure that there is access to a range of financial options to support their expansion plans,” he said. The Federal Government had said it would strengthen the Securities and Exchange Commission (SEC) to reposition the capital market to be at par with its peers globally.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, made the commitment in Abuja, while receiving the Revised Nigerian Capital Market Master Plan (2021-2025). The plan was submitted to the minister by the Capital Market Master Plan Implementation Council led by Director- General of SEC, Lamido Yuguda, and other top officials of the Commission. The minister said the review of the Capital Market Masterplan underscored the fact that capital market growth resonates with the current administration’s unwavering commitment to deepening and re-positioning the country’s financial markets as a key anchor to achieving a private sector-led development of the economy as encapsulated in the National Development Plan objectives.
She said, under her watch, the Ministry of Finance had supported the Capital Market Master Plan implementation efforts since inception, adding that the master plan represented the collective aspirations of the capital market community, which is focused on driving initiatives geared towards growing and deepening the market. She said this initiatives were being implemented with the ultimate goal of accelerating the emergence of Nigeria as a top 20 global economy by the year 2025.
Ahmed commended the Securities and Exchange Commission, Capital Market Masterplan Implementation Committee and other stakeholders for the laudable accomplishments so far recorded in the masterplan implementation journey, especially in the areas of dematerialisation of share certificates, e-dividend mandate, facilitation of access to alternative investments like Sukuk and Specialised Funds, review of CAMA and on-going review of the ISA, demutualisation of the Nigeria Stock Exchange, enhancing the commodities eco-system and design of a National Savings Strategy, among others. Also, Yuguda stated that the Commission and other stakeholders had recorded significant milestones over the years, listing some of them to include full dematerialisation of certificates, direct cash settlement, recapitalisation of CMOs and E-Dividend Mandate Management System, among others.
No doubt, the growth of the economy has a lot to do with the country’s socio-political environment. Based on this belief and the need for government to sustain its resolve to stabilise and grow it, there is need for reassurance that the coming election in 2023 will be credible, just as exemplified in the recent Osun experience.