By Chinwendu Obienyi
The year 2021, like most other years, brought enchanting developments to Nigeria’s capital market (NCM), especially as the COVID-19 pandemic seemed far from over.
The country’s stock market had in 2020 witnessed closure of companies and offices which caused the postponement of annual general meetings (AGMs) of the quoted companies and shattered the dreams, projections, and expectations of many businesses, corporates, local and foreign investors.
It, however, led to the adaptation of the ‘new normal’ with many countries, especially Nigeria, updating their regulations through the aid of technology to ensure business continuity. So when the NCM shrugged off these challenges to record the best performance (50 per cent) in six years, and wiped off the negative performance achieved in 2019, renewed optimism lurked in the minds of investors that 2021 would bring a better year-to-date (YTD) return.
Indeed, out of the total amount of equities traded in 2021, domestic investors exchanged equities worth N1.215 trillion, representing 78.66 per cent of the total and despite the increasing anxiety as regards the Omicron variant, which has led to about 2,237 cases detected in Nigeria as of December 20, 2021, the nation’s bourse recorded 6.1 per cent.
Furthermore, the market’s All Share Index (ASI), which opened 2021 at 40,270.72 points, grew to 42,716.44 points as of December 31, 2021. Also, the equities’ market capitalisation that opened the year under review at N21.063 trillion closed at N22.297 trillion as of December 31, 2021, while bonds market capitalisation rose from N17.501 trillion as of December 2020 to N19.596 trillion as of December 24, 2021.
However, the total amount of foreign outflows grew by N209.76 billion from January to November 2021. Also, some stocks exceeded 20 per cent return and they include: Honeywell Flourmills (+187.5 per cent), Guinness (+105.3 per cent), Champion Breweries (+183.7 per cent), Custodian Investment (+33.3 per cent), Ecobank Transnational (+48.3 per cent), FBN Holdings (+60.8 per cent), Julius Berger (+25.6 per cent) and Livestock Feeds (+46.8 per cent).
But these aforementioned performances in 2021 came as a result of some initiatives such as demutualization, public offer, mergers and corporate earnings that occurred in the market.
Prior to becoming a demutualised entity, the Nigerian Stock Exchange (NSE) now known as Nigerian Exchange Group (NGX) got the Senate to give its assent to the demutualisation bill in 2018 and regulatory approvals from the Securities and Exchange Commission (SEC), the Corporate Affairs Commission (CAC) as well as its shareholders.
These approvals, however, culminated in the unbundling of the Exchange on May 17, 2021, to new structure tagged “The Stock Africa Is Made Of” to amplify NGX Group’s positioning and commitment to the African financial market as a leading capital market infrastructure provider, connecting Nigeria, Africa and the world, as well as spotlighting the growth potential of the African continent.
The group also listed a total of 1,964,115,918 shares of 50 kobo each at N16.15 per share, creating room for the public to have access to its shares and to further deepen liquidity in the capital market.
Mergers, FBNH and MTN Public offer
The signed agreement to combine Flour Mills of Nigeria Plc (FMN) and Honeywell Flour Mills Plc (HFMP), a portfolio company of the Honeywell Group (HGL), will go down in history as one of the most significant happenings in Nigeria’s food manufacturing sector in recent times.
The transaction is said to see a transfer of HGL’s 71.69 per cent stake in HFMP to Flour Mills of Nigeria at a total enterprise value of N80 billion. Furthermore, in a notice on the acquisition sent to the NGX and SEC, Union Bank of Nigeria announced that Titan Trust Bank Limited (TTB) had acquired 89.39 per cent stake in the bank which has put TTB in a position to take over one of Nigeria’s oldest banks.
Meanwhile, there is still an ongoing battle as to who owns the majority share in First Bank between Nigerian business mogul, Femi Otedola, Chairman, Honeywell Group, Oba Otudeko and the current Chairman of FBN Bank (UK) Ltd, Hassan Odukale.
Also, MTN Nigeria announced the MTN Group’s intention to offer 575 million shares to retail investors in November and proceeded with the sale which drew excitement from the retail investing public.
The offer was described as “innovative” for its incentive structure and digital application process. Investors who buy and hold the shares allotted to them for at least 12 months after the allotted date are allowed an incentive of one free share for every 20 shares purchased.
The offer was also the first digital subscription in Nigeria through a primary offer administered by NGX, allowing investors to subscribe for the shares electronically.
With 2022 being a pre-election year, market analysts believe the sensitivity of the market to events in the political landscape would be heightened and they added that the year would be a game of two halves for equities.
Head of Research, FSL Securities, Victor Chiazor, who spoke to Daily Sun via a telephone chat, said, “the first half will be year of earnings and how the market will react to it as well as dividend announcements and investors trying to cash in as much as they can ahead of the elections in 2023 which might result to some form of panic selling in the second half of 2022”.
For their part, analysts at Cordros Capital, said, “In the first trading week of the new year, we expect the bulls to retain dominance as buying activities due to positioning for 2021 FY dividends will likely suppress selling activities. However, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings”.
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