Opportunities, issues that will shape Nigeria’s capital market in 2024

In this report, EHIME ALEX reviews the Nigerian capital market, highlighting stakeholders’ prospects for 2024, particularly emphasising capital market formation for infrastructure development.

THE Nigerian capital market posted unprecedented performance in 2023, with the All-Share Index (ASI) hitting a record high of over 74,000 basis points (bps) for the first time since the inception of the exchange, despite the headwinds that shaped the domestic and global investment climate.

The obstacles included the intricacies of the general election and off-cycle elections, Federal government’s reforms, geopolitical tension in Africa, the Russian-Ukraine war, and the Israeli-Hamas conflict.

However, investors’ sentiments were upbeat as the stock market broke all records.

Overview of market performance

Market performance was highly bullish as the ASI rose by 45.90 per cent to close at 74,773.77 bps on December 29, the last trading day of the year, from 51,595.67 bps it opened on January 3.

The exceptional performance saw the market capitalisation rise by 46.58 per cent to N40.92 trillion from N27.92 trillion, leaving investors with a gain of N13.002 trillion.

The sectoral indices show that some companies’ share prices perform marginally while others are minimally.

The oil and gas sector recorded the highest improved performance as the index rose by 125.54 per cent to close by 1,043.06 bps at the end of the year from 462.48 bps at the beginning of the year. The banking sector followed, rising by 114.90 per cent to 897.2 bps from 417.5 bps.

Other indices showed that the consumer goods sector increased by 90.39 per cent to 1,121.29 bps from 588.93 bps, the insurance sector by 84.48 per cent to 321.66 bps from 174.36 bps and the industrial sector by 12.86 per cent to 2,712.27 bps from 2,403.24 bps.

Market watchers have given various reasons why the stock market reported a bullish performance in 2023. Top of it was improved investors’ confidence, the national president of New Dimension Shareholders, Patrick Ajudua, told The ICIR.

He said, “The attractive yield on capital appreciation, expectation of improved dividend payout by some companies that have significantly low effect of currency devaluation, and low-interest rates on treasury bills, bonds and deposits” have made most investors, within short term investment, to realise better return from their investment in the market.

The executive vice chairman of Highcap Securities Limited, David Adonri, commented that “the equities market was driven principally by investors’ sentiment from the smooth handover of political power and the audacious market reforms with which President Tinubu hit the ground running.

“The swift arrest of cash crunch and settling of foreign investors’ trapped funds also boosted investors’ confidence,” he added.

Despite the impressive performance, the Nigerian capital market is burdened with several issues.

Issues and concerns of the market

Besides the capital market’s failure to fulfil its primary objective of capital formation (raising funds for the productive economy), the concerns about increasing market manipulation, insider dealings, unclaimed dividends and regulatory failures, to mention a few, are worrisome.

2024 in focus

In a presentation titled Economic Review and Investment Outlook for 2024, tthe chief executive officer of Financial Derivatives Company Limited, Bismarck Rewane projects that the Nigerian stock market will adjust to the direction of the monetary policy rate (MPR) in January.

He noted that the market will experience correction and that a further hike in interest rate will dampen investor appetite for stock.

He said the new stock listing will bolster market capitalisation and attractiveness, forecasting the oil and gas index for another rally.

Rewane anticipates that the proposed listing of Dangote refinery will strengthen investors’ sentiment in the stock market.

Asserting that earnings will remain a function of exchange rate losses or gains, he says moderation in inflation is expected to reduce the strain on corporate margins in 2024.

“Top Nigerian banks are set for recapitalisation exercise in 2024, merger and acquisition is imminent, recapitalisation will further strengthen the financial health and liquidity of Nigerian banks, and Nigerian banks will continue to be a major beneficiary of high yields from investment securities,” Rewane predicts.

He, however, adds that Nigerian banks relying on one-off foreign exchange gains will face severe headwinds, customers would likely default on foreign currency loans, debt service will be significantly impacted, borrowing costs for manufacturing firms will remain elevated, and on the overall investors are expected to watch the market closely.

The Securities and Exchange Commission (SEC) should be worried about the rate companies are delisting from the capital market, Ajudua said, explaining that the commission should focus more on educational enlightenment of capital market activities, as the level of awareness still needs to be higher, with investors in the market at about 10 million.

“The commission needs to improve the protection of minority shareholders’ interest in the market, as we have seen companies’ unsavoury treatment of retail shareholders.

“The commission also needs to improve investors’ confidence in the market, and market discipline must be restored at zero tolerance level of market infraction,” he added.

Unlocking the capital market potential

The apex regulator has promised to focus on galvanising the capital market in financing infrastructure development in 2024.

At a press briefing on the outcome of the third meeting of the Capital Market Committee (CMC) held in November in Lagos, the Director General of SEC, Lamido Yuguda, assured that the commission would be dedicated to utilising the capital market to tackle Nigeria’s infrastructure deficit.

He said the commission recognised the dire state of infrastructure in the country and aimed to harness the potential of the capital market to address the critical need.

“This country has what it takes to do this; this is the direction of the government, and this is what SEC is doing to galvanise the market to help finance infrastructure,” he said

Adding that the commission would support the Federal Government to unlock the full potential of the capital market in addressing the infrastructure deficit, Yuguda said, “One of the most glaring problems of the country is the sorry state of a lot of our infrastructure, and the goal of the commission in 2024 is to refocus attention on how we can galvanise capital market money into financing infrastructure.”

State of infrastructure deficit

According to the World Bank Group, it may take Nigeria 300 years to bridge its infrastructure gap with the current rate of expenditure allocations.

The Bretton Woods Institution further posits that Nigeria’s physical infrastructure gap would reach $3 trillion in 30 years.

The 2019 Global Competitive Index Report ranked Nigeria 130th out of 141 economies surveyed for quality infrastructure facilities, and the Africa Infrastructure Development Index (AIDI) 2020 ranked the country 24th out of 54 African countries.

Public spending at both the federal and sub-national levels needs to be improved, with evidence of decades of failed rail, road, and airport projects; seaport infrastructure needs to be more robust even as electricity, the big elephant in the room, is miserably supplied.

In February 2021, the Federal government developed an initiative, the Infrastructure Corporation of Nigeria Limited (InfraCorp), to tackle its infrastructure deficits.

However, the N15 trillion project, which officially commenced in April 2022 and was focused on addressing weak and dilapidated infrastructure with yearly funding of N1 trillion, has hardly made a headway.

The Group Managing Director of Afrinvest West Africa Limited, Ike Chioke, who is a member of AAA Infrastructure Nigeria Limited (Triple-A Infra) appointed by the central bank as asset manager for InfraCorp, declined to speak on their achievements or prospects for the new year when The ICIR contacted him. He said, “No comment.”

In the 2024 proposed budget, infrastructure development will receive just N1.32 trillion, portraying Nigeria’s struggle to meet the World Bank’s 70 per cent infrastructure-to-GDP (gross domestic product) benchmark, currently at 30 per cent.

This is a far cry from the $150 billion required annually to finance infrastructure investment in the country over the medium-term period of 2021-2025, as stated in the reviewed National Integrated Infrastructure Master Plan (NIIMP), a government’s strategic document initially developed in 2012 to guide Nigeria’s infrastructure investment with a total infrastructure investment of $2.3 trillion over 23 years.

Gains not being activated for economic development

The stock market’s rise was a vote of confidence in the general direction of Nigeria’s economy; however, the increase is yet to be maximised because it has not resulted in activating the primary market in strategic capital formation, Adonri said.

“Infrastructure development is a long-term project which requires capital formation through the Capital Market. Engagement between the Government and the Capital Market will provide a solid basis for addressing the challenge,” he submitted.



    Ajudua, the national president of New Dimension Shareholders, Patrick Ajuduastressed, said that Nigeria’s capital market improvement has not necessarily translated into an improved economy.

    “This is because the government has failed to rally around the market and tap into various ways the market can impact the government’s developmental project.

    “This implies that the government is yet to realise why the capital market is the barometer used in measuring the economic viability of any nation,” he explained.

    Ajudua adds that the government can utilise the capital market for infrastructural development, as seen in the Sukuk fund, a fund promoted by Islamic financial institutions which is not tailored like conventional banks but aims at granting accessibility to funds with little or no interest.

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