Stocks trading at NSE tilts towards oligopoly

Foreign and institutional investors’ continuing penchant for bigger stockbroking firms has placed Nigerian stock trading activities into the hands of a few firms seen to have dominated the market.

This growing oligopolistic market structure is typified in the broker performance where only three firms accounted for stocks trading worth N707billion, which represented 55.5percent of total N1.275trillion stocks exchanged in the full year to December 31, 2015.

The Nigerian Stock Exchange services the largest economy in Africa by GDP size, and is championing the development of Africa’s financial markets. Last year at bourse, investors buying interest could not fully be propelled given the observed relatively low activity which only sent stocks prices reeling. Also, investor’s weak appetite for riskier assets impacted on the stocks trading activity and pricing.

Out of about 207 active dealing member firms at the Nigerian Stock Exchange, it stockbrokers’ performance report for the last year open of January 2, 2015 to December 31, 2015 shows that Stanbic IBTC Stockbrokers Limited, CSL Stockbrokers Limited, and Rencap Securities (Nig) Limited respectively led the basket of ten firms that accounted for 67.11percent of total value of stocks traded at the Nigerian Stock Exchange (NSE).

Other top firms in terms of value of stocks they traded last year include: EFCP Limited, Chapel Hill Denham Securities Limited, FBN Securities Limited, A.R.M Securities Limited, Vetiva Capital Management Limited, African Alliance Stockbrokers Limited, and Apel Asset Limited.

Analysts see some of these stockbroking firms playing host to foreign investors and local institutional buyers as their major clienteles. As at November 2015, foreign investors accounted for 54.24% of Nigeria’s equity trading while local investor account stood at 45.76%, according to figures at the NSE which shows domestic and foreign portfolio participation (equity trading).

The full year 2015 details show that only Stanbic IBTC Stockbrokers Limited accounted for stocks trading valued at N257.908billion or 13.57% of the total value of stocks traded last year at the Nigerian bourse, followed by CSL Stockbrokers Limited which accounted for N244.233billion worth of equities trade or 12.85% of the total value of stocks traded on the floor of the NSE.

Also, Rencap Securities (Nig) Limited accounted for N205.873billion worth of equities trade or 10.83% of the total value of stocks traded on NSE last year.

Other are EFCP Limited (N159.215billion or 8.38%); Chapel Hill Denham Securities Limited (N99.363billion or 5.23%); FBN Securities Limited (N91.513billion or 4.82%); A.R.M Securities Limited (N57.569billion or 3.03%); Vetiva Capital Management Limited (N56.557billion or 2.98%); African Alliance Stockbrokers Limited (N52.572billion or 2.77%); and Apel Asset Limited (N50.615billion or 2.66%).

From an investment standpoint, market analysts at Lagos-based Dunn Loren Merrifield are of the view that market unpredictability which prevailed for the most part of 2015 will be sustained in 2016.

Iheanyi Nwachukwu