Nigerian Stock Exchange CEO predicts another tough year

Traders in Nigeria’s stock market may be faced with another round of falling prices this year. On Thursday, the Nigerian Stock Exchange Chief Executive Officer, Oscar Onyema, said the fall in oil prices and China’s economic slowdown will continue to put pressure on stocks on the Nigerian Stock Exchange (NSE). “We anticipate 2016 to be a challenging year for the capital market and the domestic economy,” he said. His comments came as stocks fell 3.6 percent, hitting a three-year low.

The Nigerian stock market has lost about N1.2 trillion in capitalisation due to declining oil prices and foreign exchange controls within the country, since the start of 2016.

Nigeria, which is largely dependent on oil as a source of revenue, has been hit, particularly severely, by the fall in the price of oil. This drop led to the weakening of the Naira, which subsequently enforced the Central Bank of Nigeria’s decision to put stringent monetary policies in place last year. According to experts, the policies have not helped to stop the currency from weakening against the U.S. dollar and the currency stood at N302 to the USD as of Thursday.

Africa’s largest economy has had one of the worst performing stock markets in the past year.
“The current state of the market creates both challenges and opportunities for investors but taking a portfolio approach to investing provides the best risk-adjusted alternative for participating in the capital market,” said Onyema.

How did the market perform in 2015?

The Nigerian Stock Exchange All Share Index, the NSE flagship index, declined by 17.4 percent in 2015 closing the year at 28,642 points.

All the NSE market indices performed poorly in 2015 compared to 2014. The worst hit Index was the NSE Banking Index, which plummeted by 23.6 percent followed by the NSE 30 Index and NSE Main Board Index both down 17.6 percent. The only Index that saw an uptick was the NSE Industrial Index, which saw a growth of 1.3 percent.

The equity market had only four new equity listings with five companies delisting in 2015 bringing the number of listed equities to 184 and listed companies to 190.

Steps to be taken by the NSE in 2016

“The NSE will prioritize three initiatives in 2016,” said Onyema. They include demutualizing the NSE, monetizing service suites and establishing a derivatives market.
If these initiatives are done right, the NSE will be able to increase the number of new listings across five key asset classes, said Onyema

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