When a review of activities on the Nigerian Stock Exchange (NSE) for the year ended December 31, 2008, will be done in the first few weeks of next year, indications are that it would not score low across all measurement yardsticks after all.

A report by Sterling Capital Limited at the weekend revealed that despite the rapid and huge loss of what has taken the NSE All-Share-Index and equities capitalisation 40 months to gather, the exchange yet boasts of a significant growth in turnover volume and value in the first nine months of this year.

According to the report, stockbrokers, within the third quarter ended September 30, 2008, crossed 69.2 billion units or 68.90 per cent more shares. Specifically, a total of 169.63 billion shares valued at N2.23 trillion changed hands for 3,091,688 deals, as against the 100.43 billion shares traded or N1.5 trillion in 1,917,876 deals in the corresponding period of last year.

Market watchers told Daily Independent on Monday that but for the post-March 5, 2008 meltdown, the volume and value of trades on the NSE would have been more. Analysts also believe that the sliding indicators drove many, especially the high net worth investors to alternative investment outlets such as real estate and the over-the-counter bond market, which also recorded significant growth within the period. At the end of trading on the secondary market for bonds, a total of 6.498 billion units changed hands for N6.577 trillion in 53,972 deals.

For example, the first month of the year closed with a total volume of 16.588 billion units exchanged for N245.63 billion in 290,088 deals. This was followed by 24.821 billion units representing figures for all but one week, exchanged for N325.399 billion in 294,064 deals. At the end of equities' trading in the month of April, when the meltdown actually became noticeable, even as many believed that it was one of the regular market corrections that would soon pass, investors exchanged 15.296 billion shares valued at N238.817 billion in 362,178 deals.

A look at the monthly figures for the period also showed that volume and value continued to decline especially at the end of the first half the year, before intensifying in the last quarter of the period under review. A week-by-week breakdown of the third quarter figure, shows that the figure grew from 3.033 billion shares worth N53.596 billion in 40,613 deals in the first week of the year, rising to 4.222 billion shares traded for N70.778 billion in 77,374 deals the following week, before sliding to 4.608 billion units, which changed hands for N61.869 billion in 78,882 deals.

By the end of the second week of February, volume had risen to 5.867 billion units exchanged for N83.577 billion in 97,171 deals, following which the month ended on February 29, at 7.46 billion valued at N94.588 billion in 109,859 deals. By the end of mid-February, investors staked N99.647 billion for 6.176 billion in 113,089 deals, following the figures began to drop steadily, but at a high pace, falling to a low of 2.866 billion shares traded for N51.155 billion in 65,585 deals in the week ended March 20, 2008. Equities' volume to wane up to as recently as in the last week of September when stockbrokers crossed only 1.982 billion shares worth N13.633 billion in just 37,416 deals.

The increasing volume, which began to slow down later, analysts say, resulted from investors in a hurry to get out of the market to avoid being caught unawares. This situation led to the dumping of shares as a result of which most stocks closed on offer, with little or no matching bids, leading to share price declines that took most stocks to their two-year low by the end of trading a fortnight ago.

Unable to keep proceeds of the stock market transactions in their homes, Daily Independent had last month reported that over-the-counter trading of the nation's sovereign bonds grew at the same pace as the decline in the stock market value. This, confirmed the assertion of experts like Dr. Ayodele Teriba, chief executive, Economic Associates, who told finance correspondents in Abeokuta, Ogun State, some weeks ago, at a workshop that there is yet no leakage in the financial as investors are only seeking safer havens. Such discerning investors, he said, exited the volatile stock market to hibernate in the bond market through the OTC, while others prefer bank deposits and real estates, among others.

According to available records from the NSE weekly market report, trading volume in the OTC market stood at 6.498 billion units, valued at N6.577 trillion in 53,972 deals between January and September this year.

A breakdown of the figure showed that activities in that market was heavier in the third quarter, when investors staked N2.811 trillion in exchange for 2.818 billion units in 25,083 deals, this was followed by the months between April and June when 1.892 billion units of FGN bonds changed hands for N1.944 trillion in 15,304 deals. In the first quarter of the year the market recorded 1.787 billion units valued at N1.821 trillion in 13,585 deals.

A further breakdown of the figure shows that the month of September was the busiest in that segment of the market, as investors traded 1.079 billion units worth N1.073 trillion in 10,349 deals. The month's figure is even significant, considering the fact that the period witnessed weakening equities' transaction volume as weekly transaction volume fell from an average of four billion units in January to two billion shares in September. The situation even worsened in the first few weeks of October when, for example, at the end of last week's trading, stockbrokers only succeeded in crossing 987.492 million units worth N8.436 billion in 19,885 deals, as against previous week's 1.01 billion shares, which changed hands for N7.516 billion in 26,394 deals.

At a gathering to chart a way forward in the face of its becoming endangered species, members of the Chartered Institute of Stockbrokers (CIS) at their recent annual conference in Ilorin, Kwara State at the end of last month, said the "fundamental problem of the capital market is the credit induced illiquidity in the banking system." Prof Chukwuma Soludo, Governor, Central Bank of Nigeria (CBN), has since denied claims that it barred banks from extending credit facilities to capital market operators. He has openly challenged anybody to bring the purported circular where it gave the order resulting in illiquidity in the system from credit crunch, arguing that the various banks are business concerns with boards that determine who to extend credits depending on their risk appetites.

The stockbrokers, in their communiquÈ had enough blames to trade round the various stakeholders, while admitting that the institute needs to investment more in public enlightenment campaigns to re-orientate investors towards a paradigm shift from a market that is largely seen as a gaming machine. They want the institute to use the campaign to restore investor confidence, talking about the resilience of the market and its ability to bounce back, just it should invest on continuous mandatory professional education for stockbrokers to upgrade their skills and competencies.

The apex bank also set aside plans for a uniform year end by banks, after that also fingered for the market lull, leading to initial recovery that only provided an opportunity for speculators to take profit. "The recent CBN postponement by one year for banks to converge their year end may have given investors hope of a possible rebound as most market indicators today (on Friday, July 25, 2008) pointed northwards. Even though the required liquidity to kick-start the market is yet to resurface, stocks with strong fundamentals may seem to have reached a resistant level," explained one stockbroker.

Recalling the ensuing stampede in the market during the period, the Sterling Capital analysts lamented: "For most of those who sold, the high interest rate environment made the burden of loan repayment far more than the loss from the forced sale of shares. Smart investors who took long term view however seized the opportunity of the market correction to hold significant stakes in valued companies."

Stockbrokers also believe that "the downturn in the market may not be unconnected to the investors' apathy, loss of confidence and the wearing out of the euphoria generated by the announcements of recent palliative measures."

The Sterling Capital report noted that despite the huge loss suffered by shareholders of some stocks, especially in the banking and insurance sub-sectors, there were others that either remained untouched or even recorded gains within the period. Most of these were saved by the now rested rule of the NSE that stockbrokers needed a minimum of 100,000 for the share price of a stock to move five per cent up or down at any time. As a result of this, "while the market lost as a whole, some sectors retained some of the gains recorded earlier in the year."

A sectoral analysis of the market within the period, according to Sterling Capital, "showed that the industrial/domestic products sub-sector recorded the highest gain of 300.66 per cent, followed by the Footwear sub-sector with a return of 235.34 per cent. The construction sector returned 230.77 per cent, healthcare sector, 228.78 per cent and chemical & paints 180.62 per cent. The packaging sector had a return of 144.90 per cent, while Computer & Office Equipments sector returned 118.28 per cent. Equities in the Food/Beverages sector yielded a return of 113.95 per cent, while the Petroleum sector returned 70.34 per cent. The petroleum sector in particular benefited from the policy that prevented the movement of share prices unless a minimum of 100,000 units were traded. This policy had meant that huge financial resources were required to move the prices of oil stocks."

However, the banking and insurance sectors, which were the volume drivers for most of the nine months period, lost 30.32 per cent and 6.22 per cent, respectively. The two sectors accounted for over 60 per cent of market capitalization, thus explaining the overall decline in the All Share Index.