The current situation where 10 brokers still control over 50% of the total value of transactions on the nation’s local bourse in a market with more than 250 players raises a lot of worries that if more dealing members, especially the domestic ones, are not expanded by way of government intervention, the local bourse might face similar situation it witnessed during the global financial meltdown of 2007 and 2008.
The outcome of the meltdown saw the nation’s capital market lose huge funds, as the Nigerian Stock Exchange’s All-Share Index fell from a height of 66,000 basis points in March 2008 to less than 22,000 points by January 2009. Also, over N8 trillion, or 70% of the total market capitalisation of the exchange was wiped out during the period.
It is believed that one of the major causes of the crash in the Nigerian capital market in 2008 was the massive exodus of foreign investors from the equities market, which these top brokers are also the biggest trading houses for foreign portfolio investments.
While some of these local stockbrokers are closing shops due to liquidity squeeze, the dominance of big brokers appears to be the reason they are dictating the pace in the Nigerian market for now.
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That is why some stockbrokers are advocating that the federal government, through the CBN should create an intervention fund for securities dealing firms, to avail them the necessary liquidity to maintain a consistent position on quoted securities, thus stabilizing the market.
Analysis of transactions in September
Monthly trading data obtained from the Nigerian Exchange Limited (NGX) revealed that securities dealers brokered 7.4 billion shares worth N83.78 billion in September.
This is just as the market capitalization closed at N26.45 trillion at the end of the same period, with the NGX All-Share Index appreciating by 14.77%year-to-date from 42,716.44 basis points to 49,024.16bps.
According to the data, the top 10 brokers by volume were Parthian Securities Limited (PSLC); Cardinal Stone Securities Limited (CSSL); Equity Capital Solutions Limited (EQTL); Stanbic IBTC Stockbrokers Limited (SISB); CSL Stockbrokers Limited (CSLS); Morgan Capital Securities Limited (MCSE); United Capital Securities Limited (MCSE); EFG Hermes Nigeria Limited (UBAS); APT Securities and Funds –BRD (APT); and Meristem Stockbrokers Limited (MERI). The top 10 brokers by volume did 51.93% of the total volume traded in September. This amounted to 3.85 billion shares at the end of trading on 30 September.
By value, the top 10 brokers were Stanbic IBTC Stockbrokers Limited (SISB); CSL Stockbrokers Limited (CSLS); Cardinal Stone Securities Limited (CSSL); EFG Hermes Nigeria Limited (UBAS); Investment One Stockbrokers Intl Ltd-BRD (I0NE); WSTC Securities Limited; Meristem Stockbrokers Limited (MERI); United Capital Securities Limited (UBAS); Quantum Zenith Securities and Investment Limited; FBN Quest Securities Limited (FBNS).
The top 10 brokers by value did 56.3% of the total value of shares brokered in September. These represented N47.22bn as trading closed on the floor of NGX for the month.