The Securities and Exchange Commission (SEC) has attributed the continuing foreign exchange (FX) problem to both the recent outflow of capital from the economy and the sharp decline in foreign investment inflow over the past several years.
The amount of capital imported last year decreased by 20.47% to $5.3 billion, the lowest amount in over ten years. The amount exceeded $20 billion in the boom times, but has declined as a result of escalating insecurity, strict FX management, and other issues.
A key barrier to overseas investors buying stocks, according to the SEC, is the difficulty of gaining access to dollars. This is because just 16% of the market is controlled by foreign investors.
Lamido Yuguda, the Director-General of SEC, stated at the post-Capital Market Committee (CMC) virtual meeting yesterday that the ongoing dollar scarcity, which has continued to affect dividend repatriation, is a significant concern for foreign investors.
According to the December 2022 edition of the domestic and foreign portfolio investment report, foreign participation in the local bourse has, to date, decreased in recent years due to FX liquidity and monetary policy, setting their participation at 16%.
“We all know that we are having some challenges with the foreign exchange situation in Nigeria, the international investors who have invested are having some delays in accessing foreign exchange in the repatriation of their dividends or capital and because of this, we are seeing a reduced proportion of foreign investors in the Nigerian capital market relative to what this market has been used to,” the DG said.
Nonetheless, he expressed confidence that the country’s FX situation will significantly improve with the start-up of the Dangote refinery, which is anticipated to make it easier to import refined petroleum products, as well as several steps put in place to strengthen the non-oil industry.
“If we have a higher generation of forex from the non-oil sources and a reduced utilisation to import refined petrol, these two avenues will give a much better situation where we can now use a greater availability of forex to meet the needs of investors who are interested in taking advantage of the economic potential that exists in Nigeria. It is not a situation that has no solution but the solution is in various stages of development,” he said.
In addition, Yuguda reaffirmed that the commission was trying to retain and recruit more foreign and retail investors to the capital market, noting that the NGX has outperformed other emerging markets on the continent.
To protect investors and increase market trust, Yuguda stated that the commission would continue to establish a fair valuation of the shares of companies asking for delisting from the exchange.
“Protection of investors is the central mandate of the Commission and when the Commission protects investors, we do not discriminate between minority and majority shareholders,” he said.
Yuguda added that the Investment and Securities Bill (ISB), which is now pending the President’s assent, would be signed into law before the conclusion of the current administration in an effort to boost investors’ trust in the market.
The head of the SEC revealed that the ISB has an entire session of provisions on controlling the ecosystem for commodities, stressing that the passage of the law will allow Nigeria to trade its commodities on other organized exchanges and grow the market.
The nation’s stock exchange, meanwhile, saw its losses yesterday’s decline in market capitalization of N5 billion.
The all-share index (ASI) closed at 51,944.58 points after losing 8.83 absolute points, or 0.02 percent. The market cap decreased by N5 billion to N28.295 trillion at the close.
Losses in medium and large capitalized stocks, including May & Baker Nigeria, Zenith Bank, Nigerian Exchange Group, Fidelity Bank, and Africa Prudential, had an impact on the downturn.
Moreover, the market breadth ended down, with 18 gains and 21 losses. Transnational Company (Transcorp), which closed at N1.54 kobo, experienced the largest price increase of 10%. Wapic Insurance closed at 42 kobo after increasing by 9.69%, and Champion Breweries increased by 7.64% to settle at N4.93 kobo.
Prestige Insurance gained 5.26 percent to close at 40 kobo, while Mutual Benefits Assurance increased by 6.25 percent to close at 34 kobo.
May & Baker Nigeria, on the other hand, topped the losers’ chart by 10% to settle at N4.05 per share. Ikeja Hotel closed at N1.08 after losing 9.24%, and Multiverse Mining and Exploration dropped 7.6% to finish at N2.31.
NPF Microfinance Bank fell 6.32 percent to settle at N1.78 kobo, while Academy Press lost 6.67 percent to close at N1.26.
Although there were 3,743 transactions, the whole volume traded increased by 18.72% to 302.92 million units, worth N2.023 billion. Transcorp share transactions, totaling 107.213 million shares valued at N162.832 million, topped the list of activities. With 39.308 million shares valued N206.008 million, Fidelity Bank came in second.
The United Bank for Africa (UBA) exchanged 22.603 million shares worth N190.356 million. FCMB Group traded 12.61 million shares worth N47.83 million, while Zenith Bank traded 20.614 million shares worth N521.286 million.
