Of the N33.1trillion total Nigerian Exchange (NGX) market capitalisation, 10 out of 156 listed companies control N25.62trillion translating to 77.1 per cent of the entire market valuation in six months, LEADERSHIP learnt.
The 10 companies are; MTN Nigerian Communications (MTNN) Plc, Airtel Africa, Dangote Cement, BUA Cement, BUA Foods, Zenith Bank, Guaranty Trust Holding Company (GTCO), Nestlé Nigeria, Seplat Energy and Geregu Power.
The total number of companies on the NGX as at June 30, 2023 are 156 with total capitalisation of N33.198 trillion. The NGX market capitalisation of the equities refers to the total value of the equities of all the listed companies on the Exchange.
These 10 stocks are called large cap and they dictate market trading direction through positive or negative performance as a company’s stock is generally classified as large-cap, mid-cap or small-cap.
MTNN has taken over to become most capitalized stock of the NGX, with a market capitalisation of N5.565 trillion, accounting for about 16.76 per cent of the total equities market capitalisation as as June 30, 2023. Airtel Africa’ market capitalisation followed by N4.960 trillion as it declined by N1.185 trillion from N6.145 trillion on January 2, 2023; while Dangote Cement followed with a valuation of N4.857 trillion.
BUA Cement recorded a total capitalization of N3.124 trillion, while BUA Foods achieved N2.444 trillion capitalization, gaining N1.274 trillion in six months.
Zenith Bank total capitalisation grew by N298 billion to N1.075 trillion, while Guaranty Trust Holding Company (GTCO) recorded a half year growth of N353 billion to N1.030 trillion.
Nestle Nigeria, Seplat Energy and Geregu Power capitalization stood at N990.820 billion, N823.705 billion and N750 billion respectively as at June 30, 2023.
The equities market performance in 2023 has maintained the uptrend momentum from 2022. As at June 30, 2023, the NGX All Share Index has a year-to-date (YTD) return of 18.5 per cent, driven by strong share price performances of large-cap stocks such as Dangote Cement, BUA Foods, Geregu Power and MTNN; impressive earnings performance as well as dividend declarations; and positivity following the inauguration address by President Bola Tinubu and subsequent policy reforms; including the new FX liberalisation policy.
Speaking on this development, the chief economist/head, Investment Research of PanAfrican Capital Holdings, Mr. Moses Ojo, said impressive corporate earnings and dividend pay out to shareholders contributed to these companies’ price appreciation.
According to Ojo, the three companies are the largest companies by market capitalisation on the NGX and that if these companies record one per cent gain, it will affect the direction of the stock market.
“The financial results of these companies have been impressive despite foreign and domestic challenges. Despite reporting high operating cost, the likes of MTNN and Airtel Africa have maintained robust fundamentals,” he said.
The chief operating officer, InvestData Consulting Limited, Ambrose Omorodion attributed stock price appreciation in these companies to stability and its classification, saying “investors are always after highly capitalised stocks across the world. These are companies where Pension Fund Administrators, foreign and high network investors are ready to take positions. These companies are defensive stocks and they control over 50 per cent value on the NGX.”
Omordion explained that, “in any market of the world there are different categories of stocks that lead to different indexes to measure their performance. These 10 stocks or companies on the NGX influence the general market performance as a result of its capitalisation.
“It is expected that these companies should have created more wealth for Nigerians due to their huge earnings but the shareholding structure and float has not helped in this matter.
“To reduce the influence of these 10 companies and balance the market, more new companies should be encouraged to list on the Exchange. The present market fragmentation is not the best for our market; we need to have a standardized market where we have companies from across the sectors of the economy listed so that no one firm or few firms will be domineering and dictating the movement of the market as we currently experience.”
He however said, it is not too good for these few companies to keep dominating the market because it does not represent the whole economy, and some of these companies are having float problems due to their shareholding structure, saying, this shows that the market is not deep and does not represent the size of the economy.
Omordion said, government and the market regulators should encourage companies to list and participate, saying, “making the right policies to drive economic growth and encourage small businesses to list by reducing cost of listing and post listing requirements are key to addressing this issue.”