The recapitalization exercise recently announced by the National Insurance Commission (NAICOM) took a toll on insurance stocks in September with majority of them recording price depreciation.
Data obtained from the Nigerian Stock Exchange (NSE) in Lagos showed that insurance equities dominated the losers’ table with Universal Insurance emerging the worst performing stock in September in percentage terms with a loss of 42.50 per cent to close at 23k per share.
It was trailed by AXA Mansard Insurance with 23.53 per cent to close at N1.95, while Cornerstone Insurance dipped 20 per cent to close at 22k per share. Flour Mills shed 19.35 per cent to close at N20, while Cement Company of Northern Nigeria (CCNN) lost 18.12 per cent to close at N25.30 per cent.
Other top losers were Lafarge Africa, Niger Insurance, Royal Exchange Assurance, Japaul Oil and NAHCO. Consequently, the All-Share Index during the period shed 2,082.08 points or 5.97 per cent to close at 32,766.37 compared with 34,848.45 achieved in August. Also, the market capitalization which opened at N12.722 trillion lost N760.12 billion or 5.97 per cent to close at N11.962trillion.
On the other hand, Union Diagnostic was the best performing stock in percentage terms during the period under review with a growth of 30.77 per cent to close at 34k per share. UACN Property came second with 24.20 per cent to close at N1.95, while C & I Leasing increased by 20.80 per cent to close at N3.02 per cent.
Other top gainers were Unity Bank, Regency Alliance Insurance, First Aluminum, Sterling Bank, Veritas Kapital Assurance, Neimeth and AIICO Insurance. In all, the volume of shares traded dropped by 23.15 per cent as investors bought and sold 4.15 billion shares worth N 65. 10 billion in 62,693 deals.
Commenting on the performance of the market, Prof. Sheriffdeen Tella of the Economics department, Olabisi Onabanjo University, Ago-Iwoye, Ogun, stated that the insurance recapitalization exercise contributed to the losses recorded by some insurance stocks.
Tella said the market was largely bearish and was caused by the withdrawal of funds from foreign sources. “The portfolio investment is more often than not dominated by foreign investors who react easily to world prices and withdraw or inject fund at will. “There is the need to encourage more local investors, particularly corporate investors like multinationals in telecommunication and hospitality subsectors through some incentives. “This also has a way of deepening the market, building confidence and making the market more active,” he said.
Tella said trading activities would likely be bullish in the current month when compared with September on macroeconomic stability and full implementation of the 2018 budget. Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd. said the peaceful conduct of primary election by the major political parties would likely boost foreign investors’ confidence. Kurfi expressed optimism that the peaceful conduct of primaries would enable foreign investors to predict the direction of 2019 general elections.
Also speaking, Mr. Ambrose Omordion, the Chief Operating Officer, Invest Data Ltd, attributed the development to increased sell-off caused by heightening political risk ahead of the 2019 general elections. Omordion said the political risk seemed outside the control of traders and regulators which made investors to tarry.
He added that the tardiness in the implementation of the 2018 capital budget contributed to the loss posted by the market during the review period. According to him, mixed economic data released within the period by the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) contributed to the development.
Omordion said the recent decline in the inflation rate to 11.23 per cent in August from 11.14 achieved in July, after 18 consecutive months of steady decline signaled a rise in the price of food items.