During its early years, trading activity in the Nigerian capital market was relatively weak. This was attributable mainly to the low level of information dissemination and awareness in the market. However, the market has become more efficient since the 1980s as a result of the level of computerization of trading and increased transparency in the dissemination of corporate information. Since then, the market has performed remarkably well, as evidenced from the major indicators of activity in the market. The improved performance of all the key market indicators in the 1980s was attributed largely to the establishment of the second-tier securities market (SSM) in 1985, the deregulation of interest rates in 1987, the privatisation programme of government-owned companies, enhancement in market infrastructure and requirements, innovations, as well as the banking sector reform (Adenuga, 2010). This sub- section evaluates the performance of the Nigerian stock market from 1986 when the liberalization policy was introduced to 2012, using major market indicators including all- share index, number of deals, market capitalization, and the total number of listed securities. A visual inspection of table 2.1 shows that since 1986, most of the major market indicators have recorded significant growth.
All-Share Index: Stock market indices are used as general measures of performance of stock markets in terms of price appreciation or depreciation. These indices are important economic indicators, as they gauge the health, and very often, can predict the future
49
direction of economic activity (Ikoku and Okorie, 2010). The NSE’s All-Share Value Index recorded a phenomenal growth from 163.8 in 1986 to 6,992.0 in 1996, 33,358.30 in 2006 and peaked at 57,990.22 in 2007, but declined to 24,770.52 in 2010 as a result of the effect of the global financial crisis which erupted in 2008. On November 24, 2011, the All-Share Index recorded its worst since the bubble burst in 2008, reaching its lowest point of 19,961.18 points, before rallying briefly at the tail end of the year to finish at 20,730.63 points. Specifically, the bench mark index finished in the red zone with a year-to-date return of 16.36 per cent (Ejiogu, 2012). In 2012, the All-Share Index climbed to 28,078.81 suggesting that the market is beginning to recover from the effect of the global financial meltdown.
Market Capitalization: This is the product of the total number of issued and fully paid shares of a company and its current price on a recognised exchange. The market capitalization is the most widely used indicator in assessing the size of a capital market to an economy. The market capitalization rises in a bullish market, while it falls in a bearish market. From 1986 to 1990, the total market capitalization was less than N20 billion. It hovered from N16.3 billion in 1990 to N472.3 billion in year 2000. In 2003, it was N1, 359.3 trillion and in 2004 it was N2, 112.5 trillion. It jumped over two-fold from N5, 121.0 trillion in 2006 to N13, 294.6 trillion in 2007, but this fell to N9, 918.2 trillion in 2010, due to the global financial meltdown which affected stock markets all over the world. In 2011, the market also had a bumpy ride in terms of market value, as investors lost N1.481 trillion as market capitalization of the 202 equities traded during the year declined by 17 per cent to close at N6.54 trillion as against N7.914 trillion recorded in 2010 (Ejiogu, 2012).
Number of Deals: The number of deals also increased from 27,718 in 1986 to peak at 49, 029 in 1992, before falling to 40,398 in 1993. It was 49,564 in 1995, but declined slightly to 49,515 in 1996, before rising to 78,089 in 1997. It later rose significantly from 123,509 in 1999 to 3,535,631 in 2008, and declined by -50.8 per cent to 1,739,365 in 2009. The 2010 to 2012 figures were not available.
Number of Listed Securities: When the Exchange was incorporated in 1961, the total number of securities listed was 8, comprising of 3 equities and 5 Federal Government bond that were previously listed on the London Stock Exchange (LSE). The total securities
50
increased from 8 in 1961 to 240 in 1986, 276 in 1996, 288 in 2006 and 301 in 2008. It later declined to 264 in 2010. The number of listed securities declined to 250 in 2011, but rose to 256 in 2012. Some of the major securities traded on the market during the period under review were government development stocks, industrial loans/preference shares, and equities. In terms of the listed securities, the number is still very low considering the fact that the Nigerian capital market has operated for more than 50 years.
Value of shares traded: The value of traded securities declined from N494.0 million in 1986 to N136.2 million in 1991 before rising to over N60 billion in 2002. The value of shares traded was N313.5 million in 1992, N569.7 million in 1994, N13.5 billion in 1998 and N28.1 billion in 2000. This figure climbed significantly to N2.3 trillion in 2008 before declining to N684.5 billion in 2009 as a result of the effect of the global financial crisis. The market recorded its lowest figure in 2010, where the total value of shares traded stood at N634.8 billion. In 2012, the Nigerian capital market recorded an increase in the value of shares traded, unlike most global stock exchanges. The value traded in 2012 was N657.77 billion, up 5.65 per cent, a reversal of the 20.39 per cent decline suffered between 2010 and 2011. This positive turnaround was due to the fact that local investors started coming back to the equities market, accounting for 44.3 per cent of the total market activity as at November 2012, up 38.38 per cent from 2011 (NSE, 2013).
51
Table 2.1: Selected Market Indicators 1986-2012 Year All Share
Index Number of Deals Market Capitalisation ₦’Billion Total Number of Listed Securities Total Value of Traded Securities ₦’Million 1986 163.8 27,718 6.79 240 494.0 1987 190.9 20,525 8.30 244 348.0 1988 233.6 21,560 10.02 253 137.6 1989 325.3 33,444 12.58 267 521.6 1990 513.8 39,270 16.36 295 265.5 1991 783.0 41,770 23.13 239 136.2 1992 1,107.6 49,029 31.27 251 313.5 1993 1,543.8 40,398 47.44 272 402.3 1994 2,205.0 42,074 66.37 276 569.7 1995 5,092.0 49,564 180.31 276 1,838.8 1996 6,992.0 49,515 285.82 276 7,062.7 1997 6,440.5 78,089 281.96 264 11,072.0 1998 5,672.7 84,935 262.52 264 13,572.4 1999 5,266.4 123,509 300.04 268 14,027.4 2000 8,111.0 256,523 472.90 260 28,154.6 2001 10,963.1 426,163 662.6 261 57,637.2 2002 12,137.70 451,850 764.9 258 60,088.7 2003 20,128.90 621,717 1,359.3 265 120,703.0 2004 23,844.50 973,526 1,925.9 277 225,820.5 2005 24,085.80 1,021,967 2,900.1 288 262,929.6 2006 33,358.30 4,021,780 5,120.90 288 470,253.8 2007 57,990.22 2,615,020 13,294.59 310 2,086,294.59 2008 31,450.78 3,535,631 9,563.0 301 2,379,142.70 2009 20,827.17 1,739,365 7,030.8 265 684,451.2 2010 24,770.52 NA 9,918.2 264 797,551.6 2011 20,730.63 NA 10,028.0 250 634,899.83 2012 28,078.81 NA 14,080.0 256 657,770.00
Source: Nigerian Stock Exchange, Securities and Exchange Commission Statistical Bulletin (various issues).
52