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Total dividend payment down 65% at stock market in 2009
December 21, 2009

Returns down from N280bn in 2008 to N98bn

Investors in the Nigerian capital market had a bad bargain in 2009 as return on investment (RoI) in the form of dividend declined by 65 percent during the year from N280 billion paid out in 2008 to just N98 billion so far this year. Most of the banks made losses as a result of provisioning made for bad loans in their financial results. Similarly, there was considerable increase in the number of companies that posted losses in their financials. Both factors are believed to have largely accounted for poor record of dividend pay out. Experts say the development may have reduced spending power during the year under review with investors earning less than half of their income in the previous year. Matters may be made worse before the end of the year as banks are assuming tighter positions as the year end/reporting date draws near. This will further compound the already bad position in the stock market. Bismarck Rewane, chief executive, Financial Derivatives, in his monthly report made available to BusinessDay last week, said the picture of the Nigerian capital market has further increased investors’ pessimism. In his view, the policy uncertainty that pervades government corridors is not helping matters as investors look forward to a consistent policy guide that will help the investment atmosphere. Also, the state of the banking sector has further diminished confidence in the capital market, particularly those that are still under the Central Bank of Nigeria (CBN) administration. With the banking sector alone accounting for 46.5 percent of the stock market capitalisation, the health of banks could easily impact on the stock market, Rewane said. He added that political uncertainties are increasing due to imponderables leading to policy reform backsliding and deceleration in momentum. The Dubai effect characterized by the default of Dubai World to its international obligations and other emerging market increased risk perception and pessimism which has made credit and financing of government deficit from international capital markets difficult, the report stated. He is afraid that credit rationing and risk aversion may lead to higher borrowing cost, thus amplifying recessionary pressures. He added that the Niger-Delta amnesty may falter, compounded by the political uncertainty. Rewane however said banks that are being prepared for acquisition will likely boost the rally in the capital market and expressed optimism that there will be strong recovery in the second quarter of 2010.

The Business Day Newspaper, Monday December 21, 2009.

 

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