Feature/OPED
How Nigerian Capital Market Can Combat COVID-19
By Timi Olubiyi
Across the world, the impact of the novel coronavirus is still severe despite the ease of lockdown for economic reasons.
The uncertainty continues to heighten and no economy is spared from the fall-out from the COVID-19 outbreak.
Many African capital markets are bearish, Namibia, South Africa, Mauritius, Egypt, Morocco, Kenya, Ghana, Malawi, and a few others.
In Nigeria, the first quarter of the year 2020 in terms of performance closed in the red with a negative return of (20.65 percent), as against a negative return of (1.24 percent) in the first quarter of 2019.
The market capitalization of the Nigerian Stock Exchange (NSE), which represents the market value of all listed companies, lost about N2 trillion in the first quarter of 2020.
However, surprisingly the performance of the stock market in April 2020 was positive. The market performed with a gain of 8.08 percent to close the month of April at 23,021.01 points, from an opening level of 21,300.47 points at the beginning of the month.
In terms of market capitalization for the period, the value was up by N896 billion as at April 30, 2020, from an opening value of N11.101 trillion on April 1, 2020, to close at N11.997 trillion.
In May 2020, the market on month-on-month performance closed at 9.76 percent as against +8.08 percent gain recorded in April 2020. The performance hinged higher due to investors bargain hunting even though most of the trades were executed remotely.
This surprising feat in Nigeria, particularly during the COVID19 pandemic, could be attributed to smart investors bargain hunting and the release of good end-of-the-year financial results by some of the listed companies along with improved dividend declarations in recent time.
During this period, some of the companies that released their financials are MTN Nigeria Communications Plc, Vitafoam Nigeria Plc, Dangote Cement Plc, Julius Berger Nigeria Plc, Nigerian Breweries Plc, Zenith Bank Plc, Transcorp Hotels Plc, United Bank for Africa Plc, Transnational Corporation of Nigeria Plc, Guaranty Trust Bank Plc, Stanbic IBTC Holdings Plc, Access Bank Plc, Fidelity Bank Plc, Sterling Bank Plc, Seplat Petroleum Development Company Plc, 11 Plc, Dangote Sugar Plc, BUA cement Plc Total Plc, Airtel Plc Nestle Nigeria Plc, First Bank, Okomu Oil Plc, and BOC Gases Plc.
Nonetheless, the increasing number in the incidences of coronavirus (COVID-19) in Nigeria has been a huge concern, it could signal weak economic data, decline productivity, and falling consumption rate, which might even affect the overall outputs and performance of the economy eventually.
This projection is largely due to the global negative impact of coronavirus (COVID-19) pandemic on the economy, the weak inflow of foreign portfolio investments, high uncertainty in the economy, and owing to intense selling pressure occasioned by investors’ apathy in the capital market.
Already, the COVID-19 outbreak has forced a slow or halt in the physical operations of some businesses and that could heighten in the coming months.
The Nigerian stock exchange has been operational through remote trading with technology playing a significant role in the operations.
Likewise, companies have also adopted effective usage of technology to work remotely and mitigate the risk of total business shut down.
With the current realities, the next normal way to carry on business activities effectively in the meantime is through remote communications. Technology has the potential to still improve business efficiency and also improve transactions for businesses to perform, while this COVID-19 disruption persists.
The big question is internet data bundle cheap to sustain this efficiency? Agreeably, this is a different argument which is out of the context of this article.
Nonetheless, despite the promotion of technology adoption to ease business transaction in the meantime, the outbreak of the novel coronavirus (COVID-19) so far in Nigeria has been a bad indicator of economic performance and the capital market as a whole.
The level at which the coronavirus spread exponentially can result to damage consumption, purchasing power and services, and even investment decisions among investors.
Consequently, if the spread is not curtailed within a reasonable period, it might harm the inflow of foreign direct investments, imports and export trades, manufacturing, tourism, health, hospitality, services, travels and more than likely it might disrupt or crash the economic forecasts and revenue estimates of many businesses particularly SMEs in the country.
This pandemic might eventually impact negatively on the performance of the Nigerian stock exchange and that of many of the listed companies, given the high uncertainty around production, services, and demands if the COVID-19 continues to spread.
Rather than see the market perpetually closing on negative notes, adequate government policy response is recommended to immediately cushion the effect of the pandemic.
Though it is still too early to measure the full economic impact of COVID-19 on the capital market in Nigeria, however, the early signs do not look good.
Regulators in the capital market, as a matter of urgency, need to propose to government, direct policy responses to cushion the effect of the COVID-19.
This is imperative because most of SMEs and companies listed have experienced supply chain disruption and depressing investment climate. Therefore, government intervention or palliative is required for their sustainability.
As part of an effort to reduce the negative impact of COVID19 in the country, especially the disruption of regular activities and economic instability the capital market and the market operators can be assisted by the government.
The suspension of the proposed July 1, 2020, increase in electricity tariffs across the country by the electricity distribution companies (Discos) is recommended to ease the negative impact of COVID-19.
That said, the policy responses by the Nigerian government can further be reviewed to accommodate fiscal palliative measures and economic stimulatory measures targeted at the capital market to ameliorate the impact on the economy especially to save businesses, professionals and capital market operators.
Measures such as tax deferrals, tax holidays from states and the Federal Inland Revenue Services (FIRS), reduction in interest rates on all Central Bank of Nigeria (CBN) intervention facilities and relaxation of the stringent requirements are recommended.
Further to this, the approval of extension on moratorium on federal government funded loans, through Bank of Industry (BOI), Bank of Agriculture (BOA), and Nigeria Export-Import Bank (NEXIM Bank) and the Nigerian Communication Commission (NCC) can be considered.
The NCC can look into the downward review of the internet data cost to sustain business usage, especially for remote trading and e-commerce needs.
Allocation of contingency and crisis intervention funds to subsidies salaries of some private establishment that has been badly affected by COVID-19 pandemic in health, maritime, education sectors to mitigate the massive unemployment spike in the country.
Furthermore, technical proposals should be considered from the capital market professionals and operators for the expression of measures to help their businesses and stem the tide of COVID-19 impact.
The joint development of comprehensive policy for market sustainability and recovery where applicable by government and the capital market professionals is recommended at this time. This will in no small measure minimize the impact of the pandemic in the capital market landscape and stimulate the economy at large. It will also attract more capital market participation and encourage more listing on the exchange, which in turn will provide market liquidity.
The real subject matter for the government and other economic policymakers is to see that the virus is short-lived in Nigeria.
Consequently, the performance of the Nigerian capital market will be significantly influenced by how the government can quickly address the COVID-19 pandemic.
It is imperative to state that the capital market can always support economic growth if the needed policies are put in place.
Currently, Nigeria majorly depends on crude oil foreign revenue to have a stable economy and this revenue expectation has been dashed due to global shocks. This lull and weakening of the economy also affect the performance of the listed companies on the exchange and the capital market as a whole.
Therefore, to mitigate the negative impact and to response to the COVID-19 consequences, a government intervention is necessary.
On the part of the regulators to deepening market participation, it is recommended that necessary support be given to large firms, SMEs including government agencies to list.
The Securities and Exchange Commission (SEC) and NSE should relax the listing requirements to accommodate more qualified companies to list on the stock exchange.
More so, the lowering of transaction and listing costs will directly attract more listings and deepen market participation.
Point of note is that the co-operation and co-ordination between and among the various financial markets regulators such as SEC, NSE, CBN, Pension Commission (PenCom), Debt Management Office (DMO) and National Insurance Commission (NAICOM) need to be strengthened to assure coherent of policies.
Therefore, the post-COVID-19 regulatory regime should involve consistent and coordinated policy responses and pronouncement from these regulators and agencies to create considerable effective implementations, which will in turn boost market confidence.
I foresee a return of foreign investors when a bit of stability and flattening of the curve of the pandemic has been achieved globally particularly in Nigeria.
Besides, regulators and government need to improve policies and laws to promote foreign investors and inward foreign direct investments (FDIs) because it will eventually stimulate economic development.
The policy of ease of doing business in Nigeria can be upgraded to include foreign portfolio investment policy options.
Furthermore, Foreign Direct Investment (FDI)-incentives (tax-related) to considerably increase foreign participation in our capital market ecosystem needs to reflect in the Post-COVID recovery policy.
In conclusion, equities are grossly undervalued at current prices; most stocks are far below their real worth and book value.
Also, the current valuations already offer opportunities to those who want to position for the long term. Essentially, hedging against inflation is achievable with the current equity prices if held over in the long term.
How may you obtain advice or further information on the article?
Dr Timi Olubiyi is an Entrepreneurship and Small Business Management expert. He is a prolific investment coach, Chartered Member of the Chartered Institute for Securities & Investment (CISI) and a financial literacy specialist. He can be reached on the twitter handle @drtimiolubiyi and via email: [email protected] for any questions, reactions, and comments.
By Luke Kyohere
The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:
1. The rise of real-time payments
Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this.
2. Cashless payments will increase
In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions.
3. Digital currency will hit mainstream
In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain.
The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability.
4. Increased government oversight
As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.
5. Business leaders buy into AI technology
In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk.
6. Continued AI Adoption in Payments
In payments, the proliferation of AI will continue to improve user experience and increase security. To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent.
When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.
7. Rise of Super Apps
To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills.
8. Business strategy shift
Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble.
As the payments space evolves, businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.
Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq
In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.
In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.
“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”
The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.
Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.
The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”
The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.
As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.
In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.
“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.
By Kenechukwu Aguolu
The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.
One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.
A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.
In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.
The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.
The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.
-
Feature/OPED5 years agoDavos was Different this year
-
Travel/Tourism8 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz2 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking6 years agoSort Codes of GTBank Branches in Nigeria
-
Economy2 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking2 years agoFirst Bank Announces Planned Downtime
-
Sports2 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn
-
Technology4 years agoHow To Link Your MTN, Airtel, Glo, 9mobile Lines to NIN