One year after his reinstatement as President of the Nigerian Stock Exchange, Aliko Dangote has used his influence to lift the market by N5.2 trillion, writes Goddy Egene

When Alhaji Aliko Dangote resumed office as the President of the Nigerian Stock Exchange (NSE) one year ago, the question on the lips of many stakeholders was: Would he be able to chart a new course for the Nigerian bourse that was battling to recover following huge investor confidence deficit?

But going by the performance indicators of the Nigerian stock market a year after, stakeholders are convinced that his return made possible by the ruling of an appellate court, was a good omen for the Africa’s second largest stock market.

The leading industrialist and President, Dangote Group, was elected August 6, 2009 as the 17th president of the NSE. He took over from Oba Otudeko with promises to ensure that the nation’s stock market regained momentum and transformed into a leading market. However, seven months later, his reign was disrupted by a court ruling which nullified the election.  But after patiently waiting for two years, Dangote reclaimed the NSE presidency on June 15 after an Appeal Court upturned his removal.

His return as NSE president was hailed by operators and stakeholders.
Even, the Chairman of Forte Oil Plc., Femi Otedola, whose company’s shares Dangote was alleged to have manipulated, congratulated him.

Similarly,   stockbrokers were excited with Dangote’s reinstatement, stating it was a good development for the market because it had removed many inhibitions hitherto affecting investor confidence and the development of the market.

For instance, a past president of Chartered Institute of Stockbrokers (CIS), Mr. Dipo Aina, said the resolution of the cases had cleared most issues that some people were using to perpetuate illegality in the Nigerian bourse. “With the court ruling, the picture is now clearer. The cases have been cleared and this is a good development because the cases have been impeding so many issues that could have helped in the recovery of the market. Now that the cases are over, we should learn from our past mistakes,” he said.

Aina, who is the managing director of Signet Securities and Investments Limited, had added he liked what Dangote said that he would accord stockbrokers their appropriate place on the council of the exchange. “We can now move forward because there are no more inhibiting factors again,” he declared.

Also in the opinion of leading financial analyst and Managing Director of Financial Derivatives   Company Limited, Mr. Bismarck Rewane, the return of Dangote is good for the market. “He is a stakeholder in the market first and foremost, and do not forget he is the richest man in Africa. He can create value for the market. Dangote has nothing to gain but he has everything to give to the market,” Rewane said.

His Promise
On resumption of office June 19, Dangote promised: to work with the new management with the objective of sustaining the reforms and restore market stability; ensure that the number of seats allotted to stockbrokers is increased from four to six; to deliver a first-rate capital market experience that will make us the gateway to African capital markets and to deepen the exchange and enable investors to have more diversified portfolio of investments in the capital market.

One year after, some of the promises have been fulfilled while others efforts are being made to ensure the fulfillment of others.

Market Before/After Dangote’s Return

Looking at the performance of the market before and after Dangote’s reinstatement, it is obvious that significant growth has been brought by his return. In the period between August 5, 2010 and June 18, when there was an interim president, Mallam Ballama Manu, there was a huge sell down due to high level of investors’ apathy.  The NSE All-Share Index (ASI) lost 18.2 per cent, falling from 25,715.39 to close at 21,028.37.

The height of uncertainty in the market was said to have stoked the sell-down observed during this period.
However, the trend changed after Dangote resumed. The first three months in office saw the ASI rise by 21.6 per cent. And last week, when it clocked exactly one, the market has recorded a growth of 76 per cent with the ASI growing from 21,028.39 to close at 37,024.72. In the same vein, market capitalisation.

On a global scale, Nigerian market topped other global indices in the green zone during the Dangote’s regime, leading the continent with  89 per cent  followed by Kenya with 56.20 per cent  of one year returns.

The African continent rode on the back of this performance to close with one year average returns of 30.12 per cent gain. Among other continents, Asia recorded lowest one year average returns of 4.55 per cent while the advanced countries (G7) recorded one year average gain of 19.10 per cent to close second

Stakeholders’ Assessment

Looking at the performance of the market under the leadership of Dangote, stakeholders including brokers and shareholders have concluded that the market has done well.

The Chief Executive Officer of Lambert Trust and Investment Company Limited,  Mr. David Adonri, said: “Dangote has successfully restored a firm order to affairs of the NSE within the past one year. The Board room crisis that he inherited from the previous Council has become a thing of the past. The NSE is once more poised to taking its rightful position in the process of capital formation for the Nigerian economy.”

Also, the Chief Executive Officer of Investment Centre Limited, Mr. Ifeanyi Odunwa, noted:  “The market that defiled various corrective policies put in place since the meltdown years suddenly started responding positively on a sustained basis since his return as the NSE president.  Dangote personifies investment, hard-work, integrity, resilience, humility, the Nigerian can-do spirit, goodwill, transparency, trust and confidence, which are necessary ingredients that positively drive a stock market.”

In his own assessment, the President of Association for the Advancement of Rights of Nigerian Shareholders, Dr. Faruk Umar, said: “Dangote’s ability to support the election of a first vice president, who may likely succeed him, indicates the kind of solid foundation Dangote is laying. The fact that he is the richest person in Africa and the 25th richest in the world gives international investors the confidence to invest in the Nigerian capital market.”

In his reaction, the President, Proactive Shareholders Association of Nigeria, Mr. Oderinde Taiwo, said the performance was worth celebrating because while the market capitalisation rose by 77 per cent, there are some other stocks that had recorded higher growth within one year that Dangote assumed office.

However, the growth recorded so far came frompositive initiatives that got the support of the council led by Dangote. These included the reconstitution of the council members. A market segmentation exercise from 33 to 32 sectors was completed to rebrand and reposition Nigerian stock market among its counterparts. A series of new products were introduced. Among them were the SIM Capital Alliance Value Fund, the ABSA NewGold ETF and the NSE-Lotus Islamic Index.

Market making was introduced alongside the launching of securities lending and short selling. Also, the NSE revised its listing rules and effectively reduced the listing fees. Value-added services have been introduced to address specific concerns hindering market growth.

Future Outlook

While the last one has been exciting and successful, analysts believed the performance must be sustained and improved upon.  Achieving this, they said, depended on the depth, liquidity level and good governance without compromising the principle that ensures efficiency of the market, market transparency and investors protection.

“We remained optimistic towards brighter future; the sustainability of stability in the market is very paramount and key as we expect the board and management to work out a strategy for seamless transition of leadership at the right time. This is very crucial to market integrity and investor confidence,” analysts at Proshare said.

They added that the retail end of the market needed to be given desired attention and education as it remained an integral part of the market with its own quota to the robustness and liquidity of the market, considering the peculiarities of the Nigerian market.

“In addition, we want to specifically say some of the newly introduced initiatives in the market need perfect touch with sincerity for the intended results- neglect of this may hamper development recorded so far,” they said.

In his opinion, Odunwa said for his remaining years as president of the NSE, Dangote should use his goodwill and contacts (even as his companies are already listed) to ensure the stock market listing of some of the companies operating in the telecoms, oil & gas sectors as well as the new companies that recently got privatised national power gencos and discos.

Source: Thisday