falling value of the Naira. The aggregate market capitalisation declined $2.69 billion to close at $62 billion on Friday, November 21, 2014.
It dropped from $66 billion a week before this latest decline, amidst a drop in the average volume and value by 26.6 percent and 52.8 percent to $1.5 million and $16 million respectively. Similarly, all indices depreciated during the week with the exception of the NSE Banking Index that rose by 0.34 percent and NSE Alternative Securities Market (ASEM) Index by 5.78 percent.
However, the market capitalisation has lost $6.4 billion this month from $71.39 billion on November 3, compared to $63.5 billion on November 21. Similarly, the NSE index has declined from 37,343.85 basis points to 33,926.18 basis points on November 21.
In a report by Afrinvest West Africa Limited, the financial advisory firm disclosed that the fixed income market has also been branded by an increased amount of sell-offs, as yields have largely been on the rise.
“Given the current economic and political headwinds coupled with the intensified outflow of capital owing to the depreciating naira, we anticipate sustenance of the bearish trend in the capital market,” the report noted.
Financial and investment analysts opine that the downward trend in the performance of the nation’s capital market will persist. This will continue till the market bounces back after the Monetary Policy Committee meeting. The Central Bank of Nigeria is expected to take some far reaching decisions concerning the economy.
According to Mr. Bismarck Rewane, Managing Director, Financial Derivatives Company Limited,the Nigerian capital market is simply responding to a series of economic development including the activities of financial market speculators.
“First and foremost, market capitalisation will shed some more because the market was already slightly overpriced. Again, the international investors do not know when the exchange rate issue will be settled. So, they are just taking their money out because, no matter what gain they make from the market, for instance, if they make a 10 percent gain, and there is 10 percent devaluation then, everything will amount to zero”, he said.
The current pressure on the Naira is giving financial market investors the opportunity to take their money out. They intend to reinvest should the Naira be devalued,with the hope of buying stocks cheaply.
Mr. Femi Awoyemi, Managing Director, Proshare Nigeria, listed some factors that triggered the exit of portfolio investors in recent times. Some of which include heavy sell-down by foreign investors and recapitalisation of market operators, the falling value of Naira, on-going recapitalisation of market operators, weakening proprietary trading; which he said may authorize the sale of possessions to raise funds for recapitalization.
Trading in the Top Three Equities namely- Sterling Bank Plc, FBN Holdings Plc, Transnational Corporation of Nigeria Plc (measured by volume) accounted for 409.470 million shares worth $13.916million in 4,421 deals. This contributed 30.14 percent and 16.92 percent to the total equity turnover volume and value respectively.
