The Nigerian Capital Market and 2017 Budget: Lessons for 2018 – Abdul Zubair
National budgets play an important role of fostering economic growth and development. It was in recognition of this role that the Securities and Exchange Commission (SEC) spearheaded the conduct of annual budget seminars that bring together stakeholders in the capital market and other sectors of the economy with a view to providing useful inputs to policymakers in the formulation and implementation of such budgets. After providing a highlight of the main elements and achievements of 2017 budget, the paper analyzes the 2018 provision, paving the way for an examination of the links between national budget and the capital market. It then presents the set of observations/recommendations that emanated from the 2018 budget seminar and concludes that on the basis of its track record of performance, the Nigerian capital market is set to become the largest in Africa by 2025.
Modelling and Forecasting Macroeconomic Fundamentals in Nigeria – Mohammed Shuaibu
This paper predicts the behaviour of selected macroeconomic variables in Nigeria using VECM to analyse quarterly data for the period 1999Q1–2016Q4. The findings show that the static solution forecast of the estimated model outperforms the dynamic version. Specifically, the model predicted the behaviour of the variables quite well amidst notable breaks that mimicked the actuals. The ARIMA model validated this finding because the model that accounted for breaks performed better than without breaks. The models also forecasted the growth trajectory of the economy in the build-up to the 2016 recession as well as the bearish sentiments in the stock market and depreciation of the naira. In addition, while the VECM performs better than the ARIMA model, structural breaks are important and should be considered when forecasting macroeconomic series. The study suggests that monetary and exchange-rate policy consistency is crucial for smoothening macroeconomic fluctuations and promoting market stability.
Characteristic Responses of Symmetric and Asymmetric Volatility Shocks in The Nigerian Stock Market – David A.Khue
This study examines the persistence of shocks, symmetric and asymmetric responses while providing accurate estimates of volatility in the Nigerian stock market using daily and monthly stock returns for the periods 3rd July 1999 to 12th June 2017 and January 1985 to March 2017 respectively. The study employs symmetric GARCH (1,1), asymmetric EGARCH (1,1) and TARCH (1,1) with normal, student-t, skewed student-t, Generalized Error Distribution and skewed Generalized Error Distribution. The estimated symmetric GARCH (1,1) models for both returns show evidence of volatility clustering and higher persistence of volatility shocks with explosive tendencies. The estimated asymmetric EGARCH (1,1) and TARCH (1,1) models for daily returns show evidence of asymmetry with absence of leverage effect whereas the estimated asymmetric EGARCH (1,1) and TARCH (1,1) models for monthly returns show evidence of asymmetry with the presence of leverage effect. Results of the asymmetric models also show evidence of higher volatility shocks persistence giving rise to long memory in Nigerian stock market. The student-t and skewed student-t heavy tailed distributions fitted the daily and monthly stock returns respectively. Due to the higher degree of risk and uncertainty inherent in stock markets with explosive volatility shocks, this study recommends caution in the conduct of trading strategy for securities and an increased market depth in order to make the Nigerian stock market less volatile.
Modelling Stock Price Volatility of Agro-Allied Companies in Nigeria – Sakiru O. Akinbode, Ismail O. Fasanya and Seun T. Falola
Empirical work on modelling stock price volatility in the agro-allied sub-sector of the Nigerian Stock Exchange is scarce despite the importance of agriculture to the Nigerian economy, the need to encourage investment in the sector and the importance of volatility patterns to investment decision. This study modelled conditional variances (volatility) of specific but well-known agro-allied companies in Nigeria using daily closing prices from 1st September, 2015 to 31st August, 2016. The study adopted both the symmetric and the asymmetric modifications of the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model to model the series’ volatilities. The results showed no evidence of leverage effects on stock prices except in the case of two firms and therefore based on the appropriate model selection criteria, the symmetric models appeared to be superior to the asymmetric models. It was concluded that investors needed to consider the nature and characteristics of stock price behaviour when taking investment decisions. In addition, policy makers should be careful not to make statements with potential to generate bad news for the capital market. The regulatory agencies should continue to strengthen measures to develop the capital market in order for it to be resilient and able to cope better with bad news when they occur. Finally, more research, based on a wide variety of alternative models is called for to produce more empirical evidence on volatility especially in the agro-allied sector of the Nigerian capital market.
Abdulaziz Shehu and Adamu Hassan Oil Price Shocks and Stock Market Performance in the Nigerian Economy: A Non Linear Ardl Analysis, 2008 – 2017- Sakiru O. Akinbode, Ismail O. Fasanya and Seun T. Falola
In the Nigerian economy using monthly time series data over the period January 2008 to May 2017. The short-run and long-run asymmetries were analysed using nonlinear autoregressive distributed lags (NARDL) framework. The empirical results suggest the presence of cointegration as well as asymmetric relations. Specifically, positive changes in oil price tend to have no significant effect on the Nigerian stock performance. This paper examines the asymmetric effect of oil price shocks on stock market performance. However, negative developments turned out to have positive and significant effect on stock performance in both the long and short runs. This implies the need for the regulatory agency to continue to strengthen its effort aimed at promoting the development of the capital market and making it better able to cope with external shocks such as adverse movements in crude oil prices. The current efforts of the SEC in spearheading the implementation of the capital market master plan are part of such measures. Fresh data when it is available is therefore required to enable newer research to gauge whether or not these efforts by the SEC are making the market more resilient to falls in crude oil prices on the world market.
Mergers and Acquisition as Tools in Oil and Gas Marginal Field Development in Nigeria P. C. Obutte and Jerome Okoro
IIn the 1990s, the Nigerian government mandated the transfer of fields by the International Oil Companies (IOCs) to indigenous companies interested in acquiring them. While this policy might have actualized the indigenization policy motive, the more significant objective of boosting production and reserve base through the fields has remained elusive, owing to the limitations of most of the indigenous farmees of these fields. Much of the existing literature on the problems of developing the marginal fields focus on the specific problems of the development agenda such as funding and technological needs, while glossing over issues of the corporate structures of the marginal field companies and their impact on the development of the fields. This paper examines mergers and acquisition as a tool of corporate restructuring, and their prospects for the marginal field companies. The study adopted the doctrinal research method, utilizing relevant publications for analysis of concepts, principles, legislations and policies. It finds that in spite of the rigorous procedural burden consisting mainly of consents and approvals from multiple regulatory organs, mergers and acquisitions are viable tools for rapid development of the marginal fields. To surmount the procedural burden therefore, the study recommends, among other things, a decentralized merger administration system as obtainable in other climes.
Deepening the Nigerian Capital Market with Technology: Opportunities for Operators, Regulators and FinTechs – Afolabi E. Olowookere and Mustapha Ibrahim
Technology is constantly disrupting human activities, posing risks to conventional ways and providing opportunities for new innovations and their proponents. This article explores the state of technology use and opportunities in the Nigerian capital market with the aim of further deepening the market. Analysis of the current practices suggests that technology has supported the operations and regulation of the market although there is room for further improvement, especially with the recent development in the Fintech space. The paper therefore highlights the potential areas of further technological applications and collaborations for capital market operators, the regulator and Fintech companies. Theseare necessary for a deeper capital market that will adequately compete with some of its global peers in operations and regulation.
Report of activities of the Securities and Exchange Commission and the Capital Market -Economic Research and Policiy Management (ERPM) Team