-market capitalization nosedived from N14 trillion to N8 trillion
The Nigerian Stock Exchange is being battered, clobbered and mutilated on all fronts as the economy pants… with market capitalization of quoted companies dropping from over N14 trillion to about N8 trillion in 18 months!
Investors are frustrated, and many are cashing out and counting their losses as companies face harsh and tormenting conditions.
The crash in the stock market became noticeable in 2014 as Boko Haram insurgents raged and uncertainty in the 2015 electoral process mounted, with legions of investors, especial foreigners, scampering and divesting.
With a market capitalization of N14.11 trillion in July 2014 and All Share Index at 42,736.18, investors were over the moon until policies and body language of the former president, Dr. Goodluck Jonathan sowed doubts.
By Friday, January 29, 2016, market capitalization was N8.1 trillion and All Share Index 23,820.83.
The Nigerian Stock Exchange has turned out to be the worst performing in Africa, and the third worst performing in the world after China and Saudi Arabia.
Confusion over 2015 General Elections heightened tension in the market and led to many investors exiting. But with the eventual acceptance of defeat by Dr. Goodluck Jonathan and swearing in of President Muhammadu Buhari on May 29, 2015, threat of upheaval was doused. However, investors adopted a ‘wait and see’ stance.
Months after inauguration, the absence of a cabinet and a clear-cut economic direction further devastated the capital market.
And now, with falling oil prices (Nigeria’s major revenue earner), more economic woes and crumbling Naira against other international currencies, the atmosphere is more uncertain.
The missing budget of 2016 and the needless controversy, its provisions of mind boggling amounts to frivolous items earmarked for the Presidency, Aso Rock and the National Assembly, further dampened hope in the economy and by extension the market.
Allocating 70 per cent for recurrent expenditure and 30 per cent for capital projects exposed the government as still not doing enough to stimulate the economy.
With the delisting of Nigeria by JP Morgan index, our woes were multiplied.
Many were not surprised when the market capitalization of quoted companies on the exchange recorded a loss of N1.764 trillion in 10 days this month.
The current wave of losses has been compared to the 2008/2009 economic meltdown season when the market performed woefully. From a high of N12.6 trillion in March 2008, capitalization dropped to N6.96 trillion by December 31, 2008 and N4.48 trillion by March 2009.
In one year (March 2008 – March 2009), market capitalization loss of quoted companies was over N8 trillion!