Equity investors’ value up 45% in 5 years but here’s why you should be worried

Equity investors’ value up 45% in 5 years but here’s why you should be worried

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  Equity Investors Market Worth Consumer Price Index Equity Investors’ Real Market Worth Value Eroded
Dec-2015 N9.36 trillion 180.1 N5.20 trillion N4.16 trillion
Dec-2016 N9.01 trillion 213.6 N4.22 trillion N4.79 trillion
Dec-2017 N13.54 trillion 246.4 N5.49 trillion N8.04 trillion
Dec-2018 N11.28 trillion 274.6 N4.10 trillion N7.17 trillion
Apr-2019 N10.95 trillion 283.5 N3.86 trillion N7.09 trillion

 

Against the need to preserve and grow income through investment in the Nigerian equity market, the upward pressure witnessed on Nigeria’s inflation rate has weighed on the real worth of investors despite rise in nominal investors’ worth in the last five years, BusinessDay calculations have shown.

Investors’ responses and reactions to evolutions around the micro/macro economy space, industry and companies listed on the Nigeria equity market translated into a 45 percent growth in the total market value of investments.

In the last 5 years, total market value of investments on the equity market rose by N4.03 trillion from N9.3 trillion in Dec 2015 to N13.4 trillion as at the close of trading on Friday.

Taking into consideration the effect of inflation, BusinessDay analyst divided the total market value for the periods by the CPI for the same period and multiplying all by 100.

While we may see the need to celebrate growth in the wealth of investors on the exchange, analysis revealed that investors’ real worth as at the end of trading in April 2019 dipped 26 percent from N5.2 trillion to N3.8 trillion from 2015-2019. This is despite nominal value rising 17 percent to N10.9 trillion as at April 2019 during the period under review.

Result revealed that the real worth of investors on the NSE averaged in the last 5 years N4.57 trillion. The years 2016 and 2018 saw real worth of investors on the equity market decline due to the peculiarities of those years.

Investors’ real worth continued to fall as the nation’s CPI, a measure of inflation rate, sustained an upward trend over the years on a monthly basis.

The month of April 2019 saw investors’ real worth plunge to its lowest level after a whooping N7.09 trillion in value of their investment was eroded due to rising CPI which stood at 283.5 as collated from CPI figures published by the National Bureau of Statistics (NBS).

In the last 5 years, rising consumer price index has eroded investors’ worth to the tone of N31.27 trillion.

According to the NBS report, Nigeria’s inflation rate seized its decline trend in April after inflation rate rose by 0.12 percent point to 11.37 percent against 11.25 percent in March 2019.

Meanwhile the Nigeria All share index (ASI) which measures the performance of the stock market continued its bearish trend driven by investors’ negative sentiments, after excitement over the listing of MTN shares by introduction had fizzled out, hence eroding market value.

With rising CPI, inflation rate and declining ASI, the real worth of investors in the Nigerian equity market is further threatened going forward.

Analysts however reiterate the need for market moving reforms across the economy on the commencement of the Buhari-led administration. This in their view should boost market performance and return value for investors.

Nigeria currently underperforms inflation target benchmark of 9 percent set by the monetary authority, CBN.

 

David Ibidapo



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