NSE LIVE! Nigerian equities lose N604b in 2016 as real return worsens to -38.7%

Nigerian equities closed 2016 with a net capital loss of N604 billion in spite of a strong last-month rally in December that saw equities rallying N558 billion gain in 19 trading sessions.

The benchmark indices for the Nigerian stock market showed a full-year average year-on-year decline of 6.17 per cent for 2016, equivalent to a net capital loss of N604 billion.

With inflation rate at 18.5 per cent as at November 2016, benchmark interest rate at 14 per cent, the adjusted average nominal real return for the equities market summed up to -38.67 per cent in 2016, implying that an average investor had lost more than one-third of his portfolio value.

On the face of it, the performance in 2016 might be seen as an improvement on the whopping losses in the previous two years but it actually represents a continuation of a losing streak that has seen equities losing N3.98 trillion in the past three years. Nigerian equities had lost N1.75 trillion in 2014 and compounded this with a loss of N1.63 trillion in 2015.

The All Share Index (ASI), the value-based common index that tracks prices at the Nigerian Stock Exchange (NSE), closed 2016 at 26,874.62 points as against its 2016’s opening index of 28,642.25 points. Total market value of all quoted equities also declined from 2016’s opening value of N9.851 trillion to close the year at N9.247 trillion.

Over a three-year period, investors in the Nigerian equities market had lost N3.98 trillion. Total market value of all quoted equities on the NSE had started 2014 at N13.226 trillion.

Read also: NSE LIVE! Equities remain upbeat with N32bn gain

Most sectoral indices showed that investors lost money on several fronts in 2016. The NSE Industrial Goods Index, where Dangote Cement and other cement companies are listed, recorded the highest sectoral loss of 26.4 per cent in 2016. The NSE Oil & Gas Index followed with a full-year average loss of 12.3 per cent.

The NSE Insurance Index declined by 11.4 per cent while the NSE Consumer Goods Index dropped by 4.5 per cent. However, the NSE Banking Index emerged the contrarian index with a modest positive return of 2.2 per cent for 2016.

The 2016 full-year performance however belied the strong rally recorded in December which considerably helped to moderate the haunting effect of the N1.34 trillion loss recorded in the previous month of November. . Month-on-month analysis showed that the ASI recorded average positive return of 6.47 per cent in December, rallying from its opening value of 25,241.63 points to close the month at 26,874.62 points. Aggregate market value of all quoted equities also rose from December’s opening value of N8.689 trillion to close at N9.247 trillion.

Market analysts blamed the tough macroeconomic environment characterized by rising inflation, declining Gross Domestic Products (GDP) and foreign exchange crisis for the continuing decline in share prices.

They noted that high interest rate, which made fixed-income instruments attractive in inflationary and recessionary period, also led to investment switch that saw capital flight from the equities market to the fixed-income market.

 

 

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