By Kelechi Mgboji
Assistant Business Editor
Investors lost over N83 billion in April as foreign exchange (forex) crisis, delay in the passage of the budget, and battered investor confidence combined to bring the capital market to its knees.
Value of shares listed on the Nigerian Stock Exchange (NSE) depreciated by N1.24 trillion between January and April following large scale sell off by investors fleeing the market.
Forte Oil Chairman, Femi Otedola, lost more than $400 million of his personal fortune over the past nine weeks as the stock price of Forte Oil shed 43.5 per cent in value.
Otedola, who is the company’s controlling shareholder, has seen his paper net worth drop from $1.6 billion when Forbes published its annual ranking of the world’s billionaires in March, to $1.2 billion today, according to the magazine’s real-time billionaire scorecard.
In late February, the share price of Forte Oil hit an all-time high of N342 per share after the utilities and petroleum marketing company, which is based in Lagos, released its impressive 2015 full year result and declared an attractive dividend of N3.45 per share.
However, at the close of trading Tuesday, April 3, its share price had dropped to N193.46 after recording consistent daily losses over the past few weeks.
Market capitalisation, which measures total market value of the shares outstanding of a publicly quoted company, dropped from N9.86 trillion in January 2016 to N8.62 trillion in April.
With the drop in market capitalisation, the All-Share Index measuring performance of the market also dropped 12.5 per cent to close at 25,062.41 basis points end of April, from the 28,642.25 basis points at which the equities market opened this year.
NSE monthly data showed that market capitalisation in April also decreased by N83 billion or 0.95 per cent to close at N8.621 trillion against N8.704 trillion in March – due to price depreciation.
NSE All-Share Index shed 243.81 points or 0.96 per cent to close at 25,062.41 basis points compared with 25,306.22 in March.
Total volume of shares traded on the NSE in April dropped 31.57 per cent.
Investors traded a total 11.47 billion shares valued at N33.48 billion exchanged in 62,747 deals.
The figure was lower than the 16.63 billion shares worth N48.16 billion exchanged in 73,155 deals in March.
The financial services sector consisting of banks remained the most active, accounting for 10 billion shares valued at N18.12 billion and exchanged in 12,010 deals.
It was trailed by premium board, which accounted for 824.49 million shares worth N6.96 billion exchanged in 12,010 deals.
The conglomerates sector came third with a total 212.77 million shares valued at N297.59 million transacted in 2,322 deals.
APT Securities and Funds Managing Director, Garba Kurfi, attributed the lull to forex challenges which led to withdrawal of foreign investors from the bourse.
Kurfi said the government should open another window for foreign investors and genuine businessmen following its stance on naira devaluation.
He added the current forex policy, power sector challenges, and the stalled budget contributed to the lull.
Kurfi, a senior dealing member of the NSE, said there is also investors’ apathy, which causes poor trading.
InvestData Chief Operating Officer, Ambrose Omordion, lamented that the 2016 budget impasse has slowed down economic activities, because the budget is critical to investment decision.
Enterprise Stockbrokers Managing Director, Rotimi Fakayejo, told TheNiche that both local and foreign investors are still very cautious about participating in the capital market.
According to him, the weakness of the naira at the forex market makes the situation worse.
He added: “The capital market in the first four months of 2016 has been battered by a worse economic situation. Also, the weakness of the naira has led to foreign portfolio investors exit.
“The volume and value traded within the first four months have dropped since investor confidence is yet to return.
“Despite impressive earnings and robust dividend by some listed companies, their share price continued to drop due to liquidity challenges in the capital market.”
Fakayejo said the 2016 budget may not have a direct impact on the capital market until early October.