… Foreign portfolio investors key contributors to market liquidity
By Dickson Pat
In a year marked by soaring inflation and rising interest rates, the Nigerian capital market demonstrated resilience, as ten leading stockbroking firms executed transactions valued at an impressive N2.74trnn over the first eleven months of 2024.
findings showed that the top 10 Stockbrokers were responsible for 54.37% of the total value between January and November this year.
These transactions involved the exchange of 109.06 billion shares, accounting for 42.77% of the total market volume and 54.37% of the total market value during the review period, according to the Nigerian Exchange ,NGX, monthly broker performance report.
Despite macroeconomic challenges, Stanbic IBTC Stockbrokers, CardinalStone Securities, and United Capital Securities emerged as the dominant players, collectively accounting for N1.48trn in transaction value representing 54% of total market activity.
Stanbic IBTC Stockbrokers led the rankings with transactions worth N594.78bn, capturing 11.82% of the total market value.
CardinalStone Securities followed closely, trading shares valued at N574.97bn, or 11.42%. United Capital Securities secured the third spot with transactions totalling N312.87bn, representing 6.22% of the total.
Other notable performers included Apt Securities & Funds, which facilitated transactions worth N258.39bn, and Cordros Securities, with a transaction value of N236.86bn.
Additionally, EFG Hermes, Meristem Stockbrokers, FBN Quest Securities, CSL Stockbrokers, and Chapel Hill Denham completed the top ten, collectively transacting shares valued at over N758bn.
The Nigerian capital market’s performance comes amid spiralling inflation and a series of interest rate hikes, which have tightened liquidity and raised the cost of borrowing.
Analysts noted that these economic pressures have significantly deterred institutional and high-net-worth investors, whose activities continue to drive market turnover.
Foreign Portfolio Investors ,FPIs, alongside local institutional players, remain key contributors to market liquidity. However, market watchers have expressed concerns about the dominance of a few top-tier brokers.
This concentration of market activity, they argue, creates imperfect competition, limiting opportunities for smaller stockbroking firms.
The Managing Director of Crane Securities Limited, Mike Eze highlighted that the dominance of these ten firms is attributable to their diversified client portfolios, which include foreign institutions, local institutional investors, and high-net-worth individuals.
This market structure, he noted, allows larger players to dictate market trends. “Whenever these brokers start buying, the bulls return. Conversely, when they sell and take profits, the bears dominate”, he explained.
Additionally, analysts identified transaction volume as a persistent challenge for smaller stockbroking firms. Many of these firms struggle to compete with the significant market share controlled by the top brokers, who often benefit from partnerships with foreign institutions and major domestic investors.
In an effort to stimulate competition and enhance transparency, the Nigerian Exchange introduced a broker ranking system in 2011. This initiative tracks and ranks brokers by transaction value and volume, providing greater visibility into market dynamics.
While the NGX’s efforts have increased accountability, concerns remain about the concentration of trading activity. Market analysts suggest that diversifying the client base and reducing reliance on a few dominant brokers could lead to a more balanced and competitive market environment.
As Nigeria continues to grapple with inflationary pressures and monetary policy adjustments, the capital market’s resilience is a testament to the enduring confidence of investors. However, addressing the challenges of market concentration and fostering a more inclusive trading environment will be key to sustaining growth in the coming years.
