Nigeria bourse chief pleads caution on 2021 growth expectations

By Charles Abuede

The Nigerian Stock Exchange (NSE) chief executive officer, Oscar Onyema, has said that market growth expectations for 2021 should be noted with caution as the second wave of the coronavirus pandemic in Nigeria and around the globe may slow down renewed social and economic activities in the world.

Onyema made the assertion while making a presentation at the annual 2020 Market Recap and 2021 Outlook hosted virtually by the Exchange and monitored by Business A.M.

At the virtual forum set up to review its performance in the just-concluded year 2020 and proffer expert predictions for the Nigerian capital market in 2021, Onyema said: “The year 2020 was indeed a historic one for global capital markets. Facing buffeting headwinds, world markets saw sharp swings and steep losses but largely remained resilient and orderly amid rising uncertainty.”

“For The Exchange, renewed investor optimism coupled with improved economic conditions and low fixed income yields propelled a year-end bull run. Of the 93 global equity indices tracked by Bloomberg, the NSE All-Share Index (ASI) emerged as the best-performing index in the world, surpassing the S&P 500 (+16.26%), Dow Jones Industrial Index (+7.25%), and other global and African market indexes, to post a one-year return of +50.03%,” he stated.

Onyema’s presentation highlighted the performance of the local bourse in the historic year 2020 which at the close of the year recorded a 62.42 per cent growth in market capitalisation to N21.06 trillion, from N12.97 trillion in 2019, while the market recorded an uptick of 7.25 per cent to N1.03 trillion in 2020 as turnover from N0.96 trillion in the previous year. In the year, the NSE industrial index led the pack as the best performer followed by the premium board index.

The Nigerian equities market got off to a sturdy start in 2020, returning 10.4 per cent by the eighth trading session. But by the tenth month in 2020, the equities market entered a much-awaited bull run which was buoyed by the formal announcement of the U.S president-elect, unattractive fixed income yields, and better-than-expected corporate earnings, the NSE ASI recovered from Q1’20, to close the year at 40,270.72 (+50.03%) and expunge losses of -14.90 per cent recorded in 2019.

During the 2020 remarkable year-end run, the All-Share Index gained 6.23 per cent in a single trading session which triggered a 30-minute halt of trading on all stocks for the first time since the NSE Circuit Breaker was introduced in 2016 to safeguard market integrity in periods of extraordinary volatility.

Also worth mentioning is the fact that for the second successive year, transactions in the equity market were dominated by domestic investors who accounted for 65.28 per cent of market turnover by value with retail recording 44.98 per cent and institutional investors accounting for 55.02 per cent; while foreign portfolio investors accounted for 34.72 per cent.

On the performance of the fixed income market, the NSE helmsman revealed that there was a significant increase in 2020 which saw the bond market capitalization rise by 35.52 per cent from N12.92 trillion in 2019 to N17.50 trillion.

On the outlook for the year 2021, Onyema stated that there is an expectation of a marginal reopening of business activities and the normalisation of the nation’s economy as well as the drive for revenue diversification by the government.

“The year has started on a positive note as the ASI has already returned 2.0% after 11 trading sessions. We expect the marginal reopening of businesses, normalisation of the economy and revenue-diversification drive of the Nigerian government to elicit positive sentiments throughout the year. Our growth expectations should be noted with caution, as the recent second wave of COVID-19 in Nigeria and globally, may slow down renewed social and economic activities,” Onyema said.

He also spoke about the demutualisation of the NSE, noting that as it transitions to a demutualised exchange group, the appointments of Temi Popoola as the CEO of NGX and Tinuade Awe as CEO of NGX REGCO were recently announced.

According to Onyema, the NSE believes that these appointments will support its vision to be ‘Africa’s preferred Exchange Hub’ and it looks forward to consolidating on the benefits of demutualization in the coming year.

Razia Khan, managing director and chief economist, Africa and Middle East, Global Research, Standard Chartered Bank, also speaking at the event, provided insights into the global macroeconomic environment and the outlook and opportunities in the Nigerian capital market.

Khan said that the local equities market will rally further in 2021 as yields environment continue to remain low as the building blocks are in place to sustain the rally. She also revealed that the market can become less FX sensitive as an asset class than the bonds.

Meanwhile, Oscar Onyema also reiterated the Exchange’s objective to aggressively pursue innovative products and services, access new markets and deliver better value to its stakeholders.