NGX @ 64: Stimulating Growth, Creating Wealth Amidst Economic Challenges
Despite challenges such as the global financial crisis, recession, and fluctuating investor confidence, the Nigerian Exchange Group (NGX), at 64 years, remains a vital institution for wealth creation and economic growth. CHRIS UGWU reports on the Exchange’s role in Nigeria’s economy, even in the face of significant obstacles.
Economic experts recognize that the NGX has consistently served as a catalyst in Nigeria’s pursuit of economic development. Its performance, when compared with other emerging market exchanges, has been commendable.
This resilience has been maintained despite the depreciation of investors’ shareholdings, driven by factors such as the global financial downturn, declining oil prices, insecurity, calls for economic restructuring, and governance challenges.
Over the years, the NGX has navigated numerous storms, including policy decisions by authorities that have adversely affected the capital market, contributing to low investor participation. However, it continues to weather these challenges, providing a platform for sustainable capital formation.
Memory Lane:
The Nigerian Exchange Group (formerly the Nigerian Stock Exchange) was officially launched in 1960 following Nigeria’s independence, when the Parliament enacted the Lagos Stock Exchange Act.
Before this, several studies commissioned by the Colonial Administration had concluded that establishing a domestic capital market in Nigeria was not viable.
However, the persistence of Nigeria’s founding leaders eventually led to the creation of the institutional framework that became the Stock Exchange.
While none of the original members of the Exchange are still alive today, the contributions of early pioneers such as Chief Akintola Williams, Dr. Gamaliel Onosode, and Otunba Sobumi Balogun—along with the leadership of Apostle Hayford Alile—are notable for their efforts in shaping the market.
The Lagos Stock Exchange, as it was originally known, began operations in 1961 with 19 securities listed for trading, operating out of a modest one-room office in the old Central Bank of Nigeria.
In the 1970s, it moved to the NDIB building on Broad Street, and later to the Stock Exchange building, a property jointly owned with Nadar Properties, a subsidiary of the Daily Times of Nigeria.
In December 1997, following recommendations from the Financial Sector Review led by Dr. Pius Okigbo, the Federal Government transformed the Lagos Stock Exchange into the Nigerian Stock Exchange.
Today, the NGX stands as a central institution in the Nigerian capital market, facilitating the long-term capital formation critical to the nation’s economic growth.
Under both military and civilian administrations since Nigeria’s independence, the NGX has evolved to become one of Africa’s largest capital markets.
Today, it supports more than 250 securities and has expanded its transaction floors to major commercial cities across Nigeria.
The NGX All Share Index, a key performance indicator of the market, stood at 98,558.79 points as of September 30, 2024, while the market capitalization reached N56.635 trillion.
Demutualisation Of Exchange:
The Nigerian Stock Exchange (NSE) during the half year of 2021 received final approvals of its demutualisation plan from the Securities and Exchange Commission (SEC) and Corporate Affairs Commission (CAC) respectively.
These approvals completed the Exchange’s demutualisation process.
Under the demutualisation plan, a new non-operating holding company, the Nigerian Exchange Group Plc (NGX Group) was created.
The Group created three operating subsidiaries, namely: Nigerian Exchange Limited (NGX Limited), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulation company; and NGX Real Estate Limited (NGX RELCO), the real estate company. All the entities have been duly registered at the CAC.
The late Otunba Abimbola Ogunbanjo, NSE Council President, said: “The SEC’s decision to approve the NSE’s demutualisation plans brings this aspiration to a successful conclusion in a process that included the passage of the Demutualisation Act through the National Assembly.
“We are elated that this milestone has been achieved as we celebrate the 60th anniversary of the commencement of trading at the Exchange and now look forward to the future public listing of its shares on NGX Limited.”
All-Share Index Crossed 100,000 Points For The First Time
Equity trading on the Nigerian Exchange Limited (NGX) had closed trading on Wednesday, January 24th, 2024, in the green territory as the NGX All-Share Index appreciated by 3 per cent to cross 100,000 index points hitting 101,571.11 points.
The development was unprecedented in the history of the Exchange being the first time the Exchange will achieve the feat.
Before crossing the 100,000 points, NGX had secured its position as the world’s best-performing stock market in the first three weeks of 2024, capping off the trading day on January 19, 2024, at an impressive 94,538.12 points.
With a remarkable year-to-date return of 26.43 per cent, the NGX has outshone its global counterparts.
Taking the second spot is the S&P Merval Index, reflecting the performance of the Argentine Stock Exchange (BYMA), with a year-to-date return of 26.37 per cent.
Institution For wealth Creation, Economic Growth:
Despite the challenges facing Nigeria’s capital market, which have caused concern among market operators, many citizens still regard the Nigerian Exchange Group (NGX) as one of the nation’s most valuable economic institutions since independence.
Their optimism is well-founded. Over its 64 years of existence, the NGX has not only provided opportunities for wealth creation but also served as a source of revenue through capital gains taxes.
Additionally, it has offered the government a reliable platform for raising funds to finance critical infrastructure projects.
The stock market has played a significant role in enabling the three tiers of government to access the capital necessary for development programs, helping to deliver the much-needed dividends of democracy to Nigerian citizens.
A notable achievement occurred during President Muhammadu Buhari’s administration when the NGX and FMDQ listed the $1bn Federal Government of Nigeria Eurobond.
The 15-year Sovereign Eurobond, issued at a coupon rate of 7.875 per cent per annum, marked the first foreign currency-denominated security listed and traded in Nigeria’s capital market.
To further promote financial inclusion, the Federal Government introduced savings bonds to encourage participation by retail investors.
The debut of this bond positioned Nigeria alongside countries like Sweden, Thailand, Slovenia, Indonesia, the United States, and the United Kingdom, all of which offer savings bonds.
The administration of President Bola Tinubu is aiming to grow Nigeria’s economy to $1trn by 2026.
Vice-President Kashim Shettima, during a recent meeting with the Association of Capital Market Academics of Nigeria (ACMAN), emphasized the crucial role the capital market must play in achieving this goal.
He noted, “We are now in a knowledge-driven age; without the skill set, we cannot make much progress. The capital market has a very prominent role to play in pushing us to the one trillion-dollar economy.”
Similarly, Bello Hassan, Managing Director and Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), speaking at the 2024 Finance Correspondents Association of Nigeria (FICAN) conference in Lagos, highlighted the importance of the Central Bank of Nigeria’s (CBN) recapitalization initiative.
He remarked, “The current recapitalization initiative aims at enhancing the resilience, solvency, and capacity of our banks to absorb shocks and continue to support the economic development of the nation by efficiently performing their role as the fulcrum of financial intermediation.”
Group Managing Director and CEO of UBA Plc, Oliver Alawuba echoed this sentiment, emphasizing the need for the recapitalization policy to result in expanded credit for the real sector, particularly in agriculture, manufacturing, and infrastructure.
Alawuba, represented by Ugo Nwaghodoh, Executive Director of Finance and Risk Management at UBA, stated, “With larger capital bases, Nigerian banks should be well-positioned to finance long-term infrastructure projects and provide low-cost credit facilities to businesses that will drive industrial growth. Achieving the $1trn vision is bold but achievable.”
Looking ahead
The coordinated effort between the capital market, financial institutions, and government policies is seen as essential for driving Nigeria’s economic expansion and ensuring sustainable growth in the years to come.
As the Exchange continues to adapt and grow, it remains a fundamental part of Nigeria’s economic architecture, despite challenges such as low investor participation.
Its long history of resilience highlights the pivotal role it plays in fostering economic sustainability and development.
NGX @ 64: Stimulating Growth, Creating Wealth Amidst Economic Challenges is first published on The Whistler Newspaper
