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How Market Recovery Was Achieved In Nigeria

the successful revival of The Nigerian Stock Exchange was confirmed by the admission of the institution as a full member of the World Federation of Exchanges (WFE) at its 54th General Assembly in Seoul on 28th October 2014

Edikan Ekong

It is now an incontrovertible fact that the Nigerian Stock Market has wholesomely recovered from the 2008 meltdown. Given the propensity of financial markets worldwide to suffer considerable shocks once in a while, it becomes imperative for us to analyse the various efforts that went into the recovery process with a view to identifying the key impact factors and other measures that, with the benefit of hindsight could have been applied differently. As a useful background, it should be recalled that in the decade before 2008, the Nigerian Stock Exchange (“The NSE”)’s All Share Index grew at a mouth watering average of 37% every year. In 2007 the index marked up by 75% and The NSE was in fact adjudged No.1 in the world in terms of return on investment. In May 2008, the influential American Advisory firm, JP Morgan Chase published a scathing research finding which suggested that the Nigerian market was significantly over-valued. That escalated a run by the foreign investors which was exacerbated a year later by the Central Bank of Nigeria (“CBN”)’s Bank audit.


Experience, they say, is the best teacher; but it has to be stated factually that the 2008 scenario was a totally unprecedented development for the regulators of the Nigerian capital market. Still basking in the euphoria of global acclaim for an exceedingly fantastic performance in 2007, the Management of The NSE (then under the leadership of Prof (Mrs) Ndi Okereke- Onyuike, OON) could not have envisaged that the impact of the global crisis on the Exchange would be so severe. Prof Okereke-Onyuike and her team tried vigorously to arrest and reverse the drift in the market: Transaction costs were reduced, and an attempt was made to put together a market making team. It was a desperate moment which attracted equally desperate measures (for example, as was then reported, a system ‘bug’ briefly developed which sensationally only permitted stock prices to rise, but prevented same from falling! ). To their credit, the Okereke- Onyuike team did acknowledge the importance of internal restructuring in the repair process: In 2009, some far reaching decisions were taken, including amongst others, the creation of four compact operational directorates, re-designation of the DG and immediate deputies, and very importantly, the AIM/ PRIPEX which offered a special window for the listing of concluded Private Placements.


Whereas government was not keen to approve a stock market stabilisation fund proposed by The NSE and Stockbrokers in 2008, the serious findings of the CBN special audit of Banks the following year brought a strong sense of urgency for intervention in the Banking system. Thus the establishment of the Asset Management Company of Nigeria (AMCON) in 2010; ‘’for the purpose of efficiently resolving the non-performing loan assets of Banks in Nigeria and for related matters’’. In 2013, the Federal Government, through AMCON granted forbearance to 84 stockbroking firms as part of efforts to resuscitate the capital market. That singular action emanating from the outgoing Minister of Finance, Dr(Mrs) Ngozi Okonjo-Iweala contributed immensely to the quick recovery of the market afterwards.


According to the immediate past Director-General of the Securities and Exchange Commission, Aruma Oteh, “the global financial crisis of 2008 was an indictment on regulators the world over and laid bare the immense consequences of ‘loose’ regulation.” Armed with this realisation, the SEC under Ms Oteh immediately went to work on a total regulatory reform which not only aimed at reversing the meltdown, but very laudably, to prevent future re-occurrence. Consequently, the output from the apex regulatory body in the last four years has been visibly characterised by; a strong enforcement regime, clarity of rules, capacity building initiatives, and strengthening of the self regulatory organisations such as The NSE.


The rebuilding of The Nigerian Stock Exchange, in my opinion began properly with the engagement of Oscar Onyema, a Computer Engineer and MBA graduate of Baruch College, New York, as CEO in April 2011. Oscar came in at a time when the Nigerian stock market was at its worst possible ebb: •Investor confidence, especially from the local end was near zero

•The primary market where the capital formation function of the capital market is performed, also dropped significantly. The new CEO, despite his relative young age showed clarity of purpose right from the onset. Oscar’s 5-year roadmap was firmly hinged on 21st century technology, strong regulation, first rate investor protection and a growth enabling market structure; all of which should sum up to a spectacular market capitalisation of one trillion US Dollars by 2016. Recognising that the Stockbrokers are indispensable in the operation of the market, the new CEO made painstaking effort to carry the brokers along in his plans. That proved a masterstroke.


The Chartered Institute of Stockbrokers (CIS), the Association of Stockbroking Houses (ASHON) and the Association of Issuing Houses of Nigeria (AIHN) became very active in making their opinions known at the CEO’s forums and beyond. The three groups formed a formidable advocacy team that played a very active role in the various interactions that eventually restored stability to the market. Being the body that regulates activities of individual professionals, the CIS has particularly been involved in capacity building for a world class securities market.


After four years of less than impressive performance, The Nigerian Stock Exchange’s All Share Index recorded an excellent achievement in 2012 with a growth of rate of 35%. Between 31st December 2009 and 31st December 2014, the following changes have occurred in the broad indicators of the market:

•All Share Index – Up by 66% •Turnover – Up by 95% •Market Capitalisation – Up by 140% Add the fact that the first successful IPO listing since 2008 was achieved last year with the dual listing of Seplat Petroleum Development Company on both the Nigerian and London Stock Exchanges. A good stock market mirrors the underlying economy; in good and bad times. The norm is to have an efficient stock market where prices reflect all available information on the quoted securities and respond accurately to developments in the economy. Ade Bajomo and Keneth Ohaeri recently gave a vivid account thus:

“In July 5 2012, Livestock Feeds Plc was highly on offer during the pre-open session of the market. However, the order books changed during the continuous trading session when news hit the market that Livestock Feeds signed a Memorandum of Understanding with UACN Plc on plans (by UACN) to make an equity investment in Livestock Feeds. Within seconds, the order book changed in favour of the buy side”.

In the run up to the last Presidential elections there was tremendous uncertainty and even fears of a possible breakup of the country. Nigeria, since 2014 had a gigantic battle with insurgency and sharply declining crude oil prices, and The NSE indices appropriately responded with a sharp and sustained decline. That promptly reversed after the elections when it was clear that that major political hurdle had been successfully crossed.

Finally, for the records, the successful revival of The Nigerian Stock Exchange was confirmed by the admission of the institution as a full member of the World Federation of Exchanges (WFE) at its 54th General Assembly in Seoul on 28th October 2014; and it was by a unanimous vote. While it must be admitted that a lot of work remains to be done in deepening and developing the market, it is time our local investors put fear behind and return to the market.

•Mr Edikan Ekong, FCS, Research and Technical Department, Chartered Institute of Stockbrokers, 50/52 Broad Street, Lagos. Email: edikan. ekong@cisnigeria.com, edikanekong@rocketmail. com

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