For many countries other than advanced economies, the sources of slower growth ranged from decline in commodity prices, to overhang from previous credit crises, to political turmoil. In emerging economies, 2015 marked the fifth consecutive year of declining growth at 4.0%. After routinely outstripping mature economies by 4 or 5 points in the previous decade, the emerging economies only performed better by 2 percentage points in 2015. In sub-Saharan Africa, growth slowed to 3.8% compared to 5.0% in 2014.
Like many emerging markets’ governments, the Federal Government of Nigeria (FGN) is largely dependent on oil exports as its leading revenue source. Thus FGN revenue suffered extensively from sustained low commodities prices in the global market, as well as political and economic policy uncertainty leading up to and following the general elections held in April 2015. Sustained uncertainty in the country led to postponed decision making by business leadersin anticipation of clearer direction on economic policies, thus slowing economic activity.
Although inflation remains relatively low at 9.5%1 , it is more than one percentage point higher than the 7.9% at the start of the year. The Central Bank of Nigeria (CBN) left its benchmark interest rate at 13.0% for most of 2015, but took measures to tighten liquidity to support the weakening naira. In November, it reduced the benchmark interest rate to 11%, the first drop below 12.0% in the last six years. The Monetary Policy Committee (MPC) also reduced the Cash Reserve Ratio (CRR) from 25.0% to 20.0% in order to inject liquidity into the banking system.
Despite weak emerging market growth rates, coupled with domestic security challenges, declining oil prices, and a volatile currency trend, the Nigerian economy is still expected to have grown by an estimated 4% for 2015, illustrating Nigeria’s resilience.
The year began with the continued depreciation of the naira against the dollar and uncertainty around the direction of economic policies, which fueled an already prevalent bearish sentiment in the Nigerian capital market.
The NSE’s flagship index, the NSE ASI, declined by 17.4% in 2015 closing the year at 28,642 points after starting the year relatively flat. This is due to a combination of aforementioned factors including political risk, currency volatility, and uncertainty in global crude oil prices. The NSE Banking Index was the worst hit plunging 23.6%, followed closely by the NSE 30 Index and NSE Main Board Index, (both down 17.6%); all the NSE market indices performed poorly, relative to their 2014 performance, except for NSE Industrial Index which saw an uptick of 1.3%.
The market for new equity listings was flat for the year, with only four (4) new equity listings, one (1) on the Main Board, and three (3) ETFs. In contrast, five (5) companies were delisted2 in 2015, bringing the number of listed companies and number of listed equities to 184 and 190, respectively. Turnover velocity declined through 2015 by 17.0%, with equity turnover declining 28.8% to N952.8 billion ($4.8 billion), and a foreign and local participation rate of 54.24% and 45.76%, respectively, in total value traded. Average daily turnover was also down 28.5%.
In the NSE bond market, market capitalization jumped by 32.7% to N7.14 trillion ($35.82 billion) as corporates took to the debt market to raise a total of N112.0 billion ($562.0 million) in 7 new listings; majority from financial services sector. The Federal and State Governments raised N76.5 billion ($383.7 million) and N35.8 billion ($179.6 million) in debt capital, respectively.