Airtel, MTN investors lose N326bn in July

Nigeria secures $15.15bn investments in six months
Shareholders of two telecommunication firms, Airtel Africa Plc. and MTN Nigeria Plc. quoted on the floor of the Nigerian Stock Exchange, lost about N326 billion in July 2019 following low investment sentiment in the country.
The local bourse has sustained bearish run during the month, a slump that underscores foreign investors’ frustration over lack of policy progress since President Muhammadu Buhari won re-election in February.
Investigation by New Telegraph revealed that Airtel Africa, which closed at N1.5 trillion in capitalization and N399.30 in share price on 9th of July when it was admitted on the official list of Exchange, dropped by 19 per cent or N285 billion to close at N323.50 in share price and N1.215 trillion in market capitalization. Also, MTN Nigeria, which opened the trading on July 1 at N2.626 trillion or N129.05 in share price, lost 1.56 per cent or N41 billion to close at N2.585 billion in market capitalization or N127.00 when the closing bell rang yesterday.
This brings the total loss recorded by the two giant telecoms to N326 billion. The Nigeria Stock Exchange All Share Index has dropped 11.81 per cent this year. The delay by the second administration of Buhari to inaugurate ministers and other officials who will give clear policy direction of the economy since his inauguration on May 29 was believed to be crippling the equities market. Market analysts said investors, especially foreigners, were unlikely to make significant investment in the market, if any at all, until they had a clear picture of the policy direction of the government.
This, according to them, is due to the delay in the formation of the cabinet and lack of vital information about what the economy direction is going to look like, leaving investors uncertain about what policies the government will implement as regards socio-political and economic operating environment.
The Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said that the policies of the government would determine the return of the foreign investors and an upturn in investment in the capital market. Chukwu noted that the economic policies of the new government would make the capital market attractive or unattractive for investors, both local and international investors. He said: “If the government comes up with policies that make Nigerian instruments very attractive and then stabilises the exchange rate or the exchange rate is at a level where foreign investors believe it will not depreciate materially further, then you will see the return of foreign investors, which may up their share in the market.” Chukwu said to encourage more retail investors to come back to the market, the returns matrix must favour equities against fixed income.
“This means that interest rates must be significantly below their current levels. Lower interest rates should, however, be preceded by lower inflation rates and more stable exchange rates. There is also the need to allow credits back to the capital market.
“The current CBN poli-cy, which has made lending for capital market activities unprofitable for banks, should be amended to allow for responsible lending to market operators. This will not only encourage retail investors, but will also make it possible for the licensed Market Makers to have the financial resources for carrying out their role of creating market liquidity.” On his part, Ayo Akinyele, an analyst at CSL Stockbrokers, said: “We are yet to see any major policy direction and foreign investors are not comfortable with that. We don’t have a new Minister of Finance – this is very critical to investors.”
Akinyele said he expects bearish sentiment to linger in the third quarter, potentially improving toward the end of the year. That will depend on which ministers Buhari appoints and on progress in implementing a new minimum wage and structural reforms.