$1trn capitalisation of Stock Exchange no longer feasible –Onyema

The dream of the Nigerian Stock Exchange (NSE) to attain $1
trillion capitalisation across five asset classes by 2016 may
have after all turned a mirage as its CEO, Mr. Oscar Onyema,
said it is no longer achievable.
According to Onyema, who dropped the bombshell while
presenting the 2014 Market Recap and Outlook for 2015,
Wednesday in Lagos, going by the current situation in the mar­
ket and the prevailing environment in the country, the trillion
dollar capitalisation may be as good as a wishful thinking.
He lamented that bearish sentiments prevailed in the capital
market for most of last year as foreign investors divested from
the market citing currency risk. His words: “Foreign investors
steadily withdrew from the Nigerian market due to currency
risk and the recovery of developed economies, and the effects
of the US Federal Reserve tapering of its Quantitative Easing
(QE) policy. Several macroeconomic developments also
contributed to the decline in market performance. These
include fall in crude oil prices and related pressure on the nai­
ra; the impact of CBN’s monetary policy changes introduced
at various points throughout the year; Nigeria’s declining
foreign reserves; festering insurgency in the nation; uncer­
tainty around the upcoming 2015 elections and weak cor­
porate earnings. The air of uncertainty that hovered around
the Nigerian capital market throughout 2014 caused investors
to increasingly adopt a ‘flight to quality’ strategy.”
However, this notwithstanding, he promised that the Exchange
would focus on increasing local investors’ participation during
this year.
Onyema explained that the Exchange planned to achieve this
through strategic campaign to woo more local investors.
He also promised to promote the Nigerian capital market as
an African hub for growth companies, implement more
competitive price structure in conjunction with regulators and
other market participants.
He said the NSE would equally support reforms in the power,
oil and gas sectors, the diversification of government revenue
from oil as well as implementing the 10-year capital market
master plan.
Enumerating its 2014 achievements, he said the NSE made
history when it became the first African stock exchange to join
the Inter-market Surveillance Group (ISG), an international
group comprising securities exchanges, market centres and
market regulators that perform front-line market surveillance
within their respective jurisdictions. “Admission of the NSE is
an indication that the Exchange’s surveillance capacity is in
line with international standards,” he said.
He added that following a claims verification exercise initiated
in 2013, the first and second batches of claims verified under
the rules of the Investor Protection Fund (IPF) – 343 in total
– were approved for payment in December 2014. “Payments
will be made following the verification of claimants’ identities
by external consultants engaged by the Board of Trustees of
the IPF. The maximum payout is N400,000 per claim.
“And despite the market’s sharp downturn in 2014, it is not all
doom and gloom for 2015. Although many anticipate volatility
through the first half of the year, some stock prices are at
their lowest since the May 2013 sell-off, and some are below
book value, thus, presenting domestic investors with no
currency risk, an opportunity for cautious long term investing.”
Onyema explained that as the year progresses, underpinned by
a successful election with no or low levels of violence, a
tighter grip on the security situation in north-eastern Nigeria,
and a more certain macroeconomic outlook for oil prices,
interest rates and the naira, the market’s attractiveness could
improve rather significantly.