NSE: A legacy of purposeful investment

The Nigeria Stock Exchange (NSE) stands out as one of such institutions which have acted as catalyst in the nation’s stride to economic greatness. First established in 1961 as the Lagos Stock Exchange, the market started with 19 securities which were manually traded. It, however, metamorphosed into the Nigerian Stock Exchange in December 1977. Market […]

The Nigeria Stock Exchange (NSE) stands out as one of such institutions which have acted as catalyst in the nation’s stride to economic greatness.

First established in 1961 as the Lagos Stock Exchange, the market started with 19 securities which were manually traded. It, however, metamorphosed into the Nigerian Stock Exchange in December 1977.

Market analysts recall that certain exigencies necessitated the opening of transaction floors of the NSE in major commercial cities in the country much later.

These exchange floors were in Abuja, Benin City, Kaduna, Kano, Ibadan, Ilorin, Onitsha, Owerri, Port Harcourt, Uyo and Yola, while Lagos remained as the headquarters.

Many analysts also recall the contributions made to the growth of the exchange by such persons like late Sir Odumegwu Ojukwu, Mr Akintola Williams, Dr Hayford Alile, amongst others.

The stock market in the main comprises such operators as stock brokerage firms, issuing houses, corporate law firms, auditors and reporting accountants.

The NSE in 1977 introduced the Automated Trading System (ATS), in replacement of its old manual system. The effort was aimed at modernising the exchange’s operations, while keeping pace with trends in global economic activities.

The automation, capital market monitors agree, has enabled investors’ bids and offers to be matched daily by stockbrokers on all 12 trading floors of the NSE through a network of computers.

They further note that several innovations over the years had effectively deregulated the nation’s capital market, so as to allow improved competitiveness, while making it more investor friendly.

The Central Securities Clearing System Limited (CSCS), a subsidiary of the NSE, incorporated in 1992, offers custodian services, while also facilitating automated market transactions, clearing, settlement and delivery of transaction.

Corporate lawyers are quick to point out that four legislations moderate the daily market activities of the NSE.

These include the Investments and Securities Act (1999), Companies and Allied Matters Act (1990), Nigerian Investment Promotion Commission Act (1995) and Foreign Exchange (Miscellaneous Provisions) Act (1995).

While the NSE is self-regulatory, the Securities & Exchange Commission (SEC), however, keeps a tab on its activities by reason of the provisions of the Investments & Securities Act (1999).

Stock market watchers also express the viewpoints that the size and scope of the NSE, widely seen as Africa’s biggest capital market, is quite remarkable as it is home to about 243 securities.

In specific terms, the exchange currently warehouses 34 Federal Government stocks, four State Government stocks, six Industrial Loan (Debenture/Preference) Stocks and 199 Equity/ Ordinary Shares of companies worth about N5.902 trillion.

Analysts point out that the Federal Government’s indigenisation programme in 1977 had created a rare opportunity for Nigerians to acquire the 60 per cent shares multi-national companies were compelled to sell to citizens.

According to Prof. Ndidi Okereke-Onyiuke, the immediate-past Director-General of the NSE, certain factors are responsible for the phenomenal growth of the NSE.

“The twin effects of market automation in 1997 and banking sector consolidation in 2005 were responsible for the evolution of a modern day Nigerian capital market”, she says.

Okereke-Onyiuke, who served the exchange for 30 years, expatiates that the initiatives earned for the NSE, a distinguished rating from the International Finance Corporation (IFC) in 2007.

No doubt, the increased listing of companies’ shares, new investment products, companies’ expansion and new relevant legislations for the capital market are pointers to the leveraged earnings for Nigerians through the NSE.

Available records indicate that between 2006 and 2007 — the period generally considered by stakeholders as the peak period of portfolio investment in Nigeria — about N1.5 trillion worth of new issues were approved.

They further show that in December 2007, the net worth of 209 listed companies had appreciated to N10.2 trillion, from the opening capitalisation of N5.12 trillion recorded in January 2006.

Also the All-share Index, which measures the direction of the market, grew by 74.73 per cent; from a 33,189.30-point opening index to 57,990.23 points in the corresponding period.

The records further show that in real terms, the annual cumulative returns on investment for about 10 million investors by the end of 2007 had grown by 75 per cent, compared with the 20 per cent growth before the consolidation.

Other available market statistics also show that the traded volume of shares in 2007 rose to 129 billion shares, compared with the total of 36.7 billion traded in the whole of the 2006.

In value terms, investors within the 11 months of 2007 committed about N2 trillion, compared with the N470 billion recorded in the previous year.

Stock buyers recall their different experiences on their involvement in the stock business in Nigeria.

Chief  Ikenna Nwoye, a spare parts dealer and father of six, says that in the last two years of his involvement in the capital market, the prospect of a good retirement has opened up for him.

Nwoye says that the investments he made between 2006 and 2007 are now worth about N102 million, adding that his new understanding of the market dynamics has opened a window of opportunity for his children’s education needs.

Mr Segun Olawuyi, 60, is a retired civil servant and he says that the stock market had offered him an opportunity for “wealth consolidation”.

“`The money I made from investing part of my retirement entitlements in stocks  between 2005 and 2007 is more than my total earnings throughout my 35 years of service,’’ he says.

Though he would not disclose his exact worth, Olawuyi says that he is quite comfortable; adding that he now combines the stock business with farming to boost his income sources.

On a different note, Mr Olumide Akerele, bemoans his foray into the capital market, describing it as “uneventful and without charisma”.

Akerele, a fish farmer, recalls that he started portfolio investment in late 2007, adding, however, that he had been discouraged by the huge losses he recorded during his short spell in the Nigerian capital market.“I was totally devastated by losing several millions of naira just months after investing in some banks and other blue chip companies,’’ he adds. (NANFeatures).