Airtel Africa Plc, Dangote Cement Plc and eight others’ market capitalisation amounted to N23.371 trillion, controlling 81.8 per cent total Nigerian Exchange (NGX) market capitalisation in five months.
The other eight companies are; MTN Nigeria Communications (MTNN), BUA Cement, Nestle Nigeria, BUA Foods, Seplat Energy, Zenith Bank, Guaranty Trust Holding Company (GTCO) and Nigerian Breweries.
The total number of companies on the NGX as at May 31, 2022 are165 with total capitalisation of N28.573 trillion. The NGX market capitalisation of the equities refers to the total value of the equities of all the 165 companies listed on the Exchange.
The 10 stocks’ capitalisation up by N5.235 trillion to N23.371 trillion on May 31, 2022 from N18.136 trillion they opened for trading for the year.
Airtel Africa, the most capitalised company listed on the NGX grew by N3.589 trillion to N6.640 trillion in five months. Dangote Cement market capitalization followed by N341 billion to N4.720 trillion, while MTNN capitalization appreciated by N672 billion to N4.682 trillion in five months.
BUA Cement capitalization stood at N2.514 trillion as at May, 2022, recording N243 billion gain, while Nestle Nigeria recorded a year-to-date loss of N124 billion to close at N1.110 trillion as at May, 2022.
Analysts believed foreign investors’ participation in the trading of Dangote Cement; MTN Nigeria and Airtel Africa stocks drive price appreciation.
It would be recalled that Airtel Nigeria and MTNN has been notably expanding its business beyond just the offerings of telecommunications services.
According to the chief economist/head, Investment Research of PanAfrican Capital Holdings, Mr. Moses Ojo, impressive corporate earnings and dividend pay out to shareholders contributed to these companies’ price appreciation.
According to Ojo, the three companies are the largest companies by market capitalisation on the NGX. If these companies record one per cent gain, it will affect the direction of the stock market.
“The financial results of these companies have been impressive despite foreign and domestic challenges. Despite reporting high operating cost, the likes of MTN and Airtel Africa have maintained robust fundamentals,” he said.
The chief operating officer, InvestData Consulting Limited, Ambrose Omorodion attributed stock price appreciation in these companies to stability and its classification, saying “Investors are always after highly capitalised stocks across the world. These are companies where Pension Fund Administrators, foreign and high network investors are ready to take positions. These companies are defensive stocks and they control over 50 per cent value on the NGX.
While analysts also lamented what they see as a fragmented stock market with little trading options for investors and dealing members, they opined that the government should prioritise partial privatisation of large public enterprises and get them listed on the Exchange to boost liquidity and create a more diffused market capitalization away from the few companies.
Speaking on the stock market structure, recently, a Financial economist and a Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke, said: “the Federal Government needs to partially privatise government assets such as the Nigerian National Petroleum Corporation, NNPC through the NSE in order to create liquidity and enhance market capitalisation.”
Uwaleke who spoke to Financial Vanguard on the sideline of the CAMCAN 2020 workshop, said: “My advice is for the Federal Government to deploy proceeds from the sales of these public enterprises to recapitalise development financial institutions such as the Bank of Industry (BoI) and Bank of Agriculture (BoA).”
Uwaleke also advocated the partial privatisation of the Nigerian Commodity Exchange (NCX) and called on the government to put in place policies to support the commodity trading ecosystem as this will help boost the capital market.
He also canvassed for the provision of fiscal incentives for companies listed on the Securities Exchanges to boost their performance and market capitalisation.
The chief operating officer, Investdata Consulting Limited, Mr. Ambrose Omordion said: “In any market of the world there are different categories of stocks that lead to different indexes to measure their performance. These 10 stocks or companies on the NGX influence the general market performance as a result of its capitalization.
“It is expected that these companies should have created more wealth for Nigerians due to their huge earnings but the shareholding structure and float has not helped in this matter.
“To reduce the influence of these 10 companies and balance the market, more new companies should be encouraged to list on the Exchange. The present market fragmentation is not the best for our market; we need to have a standardized market where we have companies from across the sectors of the economy listed so that no one firm or few firms will be domineering and dictating the movement of the market as we currently experience.”
He added that, “it is not too good for these few companies to keep dominating the market because it does not represent the whole economy, and some of these companies are having float problems due to their shareholding structure. It shows that the market is not deep and does not represent the size of the economy.”
Omordion said the government and the market regulators should encourage companies to list and participate, saying, “making the right policies to drive economic growth and encourage small businesses to list by reducing cost of listing and post listing requirements are key to addressing this issue.”