Equities slide further on Stock Exchange

Nigeria Stock Exchange

Nigeria Stock Exchange

The equities market closed yesterday on a negative note, as Nigerian Stock Exchange [NSE] All Share Index [ASI] depreciated by 0.16 per cent to close at 31,218.58basis points, compared with the 0.21 per cent depreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at 9.92 per cent.

Market breadth also closed negative as Berger led 18 gainers against 28 losers topped by NNFM at the end of yesterday’s session- an unimproved performance when compared with previous outlook.

Market turnover equally closed negative as volume slipped by 36.68 per cent against 68.82 per cent decline recorded in the previous session. Access, Transcorp and Uniondac were the most active to boost market turnover. Guaranty and Nestle topped market value list.

Volume shockers included Nigerins which led the list of active stocks that recorded impressive volume spike at the end of yesterday’s session.

Meanwhile, the recent results of insurance firms quoted on the floor of the exchange has shown that some are on the verge of collapse.

This has translated into their abysmally low or stagnant share price.

Of the 14 insurers under analysis, eight have share price of N0.50, while three have share price above N0.50 but less than one naira.. In short, none have share price exceeding N5.

The share price of companies like Equity Assurance, Staco Insurance, Consolidated Hallmark Insurance have remained stagnant since 2011 while Sovereign Trust and Cornerstone Stone last rose since 2013.

The N102.15 cumulative market capitalization of the 14 insurers is less than the N265.14 billion market cap of Tier 2 lender, Stanbic IBTC.

Therefore, the recurring losses of some insurance firms as evidenced by their negative retained earnings threatens dividend paying abilities, is denting their share price and threatens going concern.

Companies like Wapic, Equity, Sovereign Trust, UnityKapital, Staco and Wapic have incurred more losses than profits since their existence.

Furthermore, in the last rebased GDP estimate, the insurance sector contributed less than one percent to the economy of $510 billion (80.22 trillion), this lags Telecoms and information technology’s contribution of 8.68 percent to the economy.

Analysts called for a scheme of mergers and acquisitions, saying it will will help reshape the Nigerian insurance industry since there are too many weak ones.

‘’Mergers and Acquisition can generate cost efficiency through economies of scale, can enhance the revenue through gain in market share, and can even generate tax gains and reduce costs of capital. It worked out in the banking sector, so why won’t it work for the insurance sector,’’ they said.

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  • Cynthiananderson

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  • Josiah Ilori

    I begin to wonder why the insurance business is not successful and profitable as obtained in other developed world! My answer is that most of them in Nigeria are not properly funded and lack professional staff! Insurance business is as cash intensive as the banking business and deserves adequate funding as the case with any financial institutions. In Nigeria, it appears the case is the opposite. A thorough investigation of promoters of insurance business lack adequate research of the industry. Availability of cash flow may not be enough to rush in to the establishment of insurance business. There is much to it than adequate financial base. A strong look at the insurance industry in Nigeria shows adequate success if properly analysed and researched. The old tradition of just insuring vehicles, life, and properties are no longer applicable. There is more to it. In the developed world, new areas have submerged that have brought tremendous wealth to the industry. An evaluation of the environment under which such industry operate will evince the direction which we must follow in order to succeed. Any serious minded insurance company must be transparently honest and be prepared to protect the consumers at all cost. Follow up with government releases that relates to insurance must be researched and follow up. Suggestions that will help both the government and the insurance must be released to the authorities. If I may ask, how many properties are insured in Nigeria? Very few! In Lagos State alone, most of the houses that are not under mortgage are uninsured! The insurance company should liaised with the authorities with facts and figures that will guide them to make reasonable and viable decision. If government is guided with facts that will help generate more funds, surely it will give support to the initiators of such advice. The Commissioner of Insurance should be given reasonable power to guide the industries. As a matter of fact, most of the insurance companies in Nigeria are inadequately funded. They should merge and form a viable and successful business. It will surprise you that less than one percent of GNP are provided by the insurance companies in Nigeria! This is embarrassing to the industry. Judging from the market evaluation of the wealth in the Nigeria, the insurance business should generate at least five per cent of the wealth. In passing, my personal recommendation.is that the insurance industry in Nigeria, should seriously consider merger and acquisition in order to foster the desired progress that the business deserves.