1.0  INTRODUCTION

In 2004, Nigeria reached another milestone in the drive to transform the economy. During the year, the Federal Government launched the National Economic Empowerment and Development Strategy (NEEDS), a medium term economic reform agenda, with the primary objectives of poverty reduction, wealth creation and employment generation. Also, the programme accords high priority to the private sector as the engine of growth through which an estimated seven million new jobs would be created. Significantly, the reform has been endorsed by the World Bank and the International Monetary Fund (IMF).

However, economic performance in 2004 was mixed, with significant gap between expectation and achievement. Despite stellar performances in the telecommunications sector and the management of the foreign exchange rate, general economic growth was constrained by a resurgent inflationary pressure, high lending rate, the inability of the refineries to work at full capacity, and weak infrastructure support, especially epileptic power supply and dilapidated intra-city road network.

The Privatisation Programme was virtually stalled during the year, save for some sales to core investors. Even though a cordial working relationship was observed between the Executive and the Legislative arms of government, the political gains could not be converted into economic gains because of other untoward developments in the political arena that tasked investor confidence. These included the perennial discontent in the Niger-Delta and the disturbances in Plateau and Anambra States.

2.0 MARKET TURNOVER

Turnover on The Nigerian Stock Exchange in 2004 stood at N225.8 billion, up by 87.1% on the N120.7 billion recorded in 2003. The bulk of the transactions was in equities, which accounted for N223.8 billion or 99.1% of the turnover value.

The Federal Government Development Stocks Sector recorded a turnover of N300 million, compared to N281.2 million in 2003, while the State Government Bonds Sector and the Industrial Loans/Preference Stocks Sector recorded a turnover of N1.73 billion and N17.5 million, respectively.

Automation and the increased local and international awareness of the opportunities available in the Nigerian stock market accounted for the high turnover growth.

3.0 TRADING IN RIGHTS

A total of 201.6 million rights were exchanged in 326 deals valued at N79.9 million, as against 55.5 million rights exchanged in 276 deals for N64.5 million in 2003. In value terms, this represents 23.9% increase over the turnover recorded in 2003.

There was trading in the rights of eight companies, as against three in 2003. The companies whose rights were traded last year on The Exchange are:
§  Flour Mills of Nigeria Plc
§  UAC of Nigeria Plc
§  Oando Plc
§  Cornerstone Insurance Plc
§  Niger Insurance Plc
§  NEM Insurance Plc
§  African Petroleum Plc
§  Omega Bank Plc

4.0 MARKET CAPITALISATION

The total market value of 276 securities listed on The Exchange appreciated by 55.5% to end the year at N2.112 trillion. A combination of new listings, supplementary issues and price appreciation in the Equities Sector accounted for the growth in market capitalization.

On 18th June, the market capitalization attained an all-time high of N2.189 trillion. The market capitalization attained and exceeded the two-trillion-naira mark on 5th July 2004.

EQUITY

	New Listings in 2004
1.	Standard Trust Bank Plc
2.	Zenith Bank Plc
3.	Oceanic Bank International Plc
4.	First City Monument Bank Plc
5.	ACB International Bank Plc
6.	Tourism Company of Nigeria Plc
7.	Acen Insurance Plc

BOND

1.	25th FGN Floating Rate Bond 2006
2.	26th FGN Floating Rate Bond 2008
3.	27th FGN Floating Rate Bond 2010
4.	28th FGN Floating Rate Bond 2013
5.	1st C/River State F/Rate Red. Ranch Dev. Bond 2004/2007.

Following the listing of Tourist Company of Nigeria Plc, The Exchange created a new sub-sector in the Equity Sector of the Daily Official List – Hotel and Tourism - which brought to 27 the number of equity sub-sectors on The Exchange

One Federal Government Stock was delisted due to maturity.

At the end of the year, the following 20 companies emerged with the highest market capitalization, in descending order:

5.0 THE ALL-SHARE INDEX

The Nigerian Stock Exchange All-Share Index grew by 18.5% to close the year at 23,844.45. On 18th June, the index had attained an all-time high of 30,703.46 before dropping to its year-end position. The performance of the index reflects the difficult economic environment quoted companies operated in 2004.

6.0 NEW ISSUES

The Exchange continued to meet the financing needs of businesses in Nigeria. This important function of the market was once again brought to the fore with the new Central Bank directive to banks on minimum shareholders’ fund. The directive has compelled many banks to approach the stock market for additional funding.

During the year, The Exchange considered and approved 37 applications for new issues valued at N235.53 billion, as against 26 applications for new issues valued at N185.0 billion in 2003. This confirms the high level of investors’ confidence in our market. Significantly, the private sector accounted for the bulk of the new issues approved in 2004, unlike in 2003 when the Federal Government bond issue accounted for N150 billion out of the total amount approved to be raised during the year.

A breakdown of approvals in 2004 showed that the sum of N25.68 billion was raised through Initial Public Offering (IPO); N62.0 billion through supplementary issue by already listed companies; N18.1 billion through rights issues; and N6.0 billion through bonds issue. Listing by Introduction accounted for N86.11 billion, in addition to four applications for supplementary listings valued at N37.7 billion.

7.0 MARKET DEVELOPMENT

Ø Remote Trading
In 2004, The Exchange implemented a multi-pronged market development strategy under which market infrastructure and investor education received high prominence, among other issues that facilitate the development and growth of the Nigerian stock market in the desired direction.

As was promised at the beginning of the year, it became possible during the year for dealing members of The Exchange to commence trading from their offices. As at the end of the year, more than 50 stockbroking firms have been enabled for remote access to the Trading Engine. This has made it possible for more houses to trade daily on The Exchange, thereby boosting the liquidity of our market and the opportunity it offers for price discovery.

At the same time, The Exchange relocated its Area Office in Abuja to a more accessible, spacious and purpose-built facility and the existing trading infrastructure at the Area Office was modernized and upgraded with the adoption of satellite communication medium for access to the Trading Engine by dealers trading from the Federal Capital.

Ø Review of Rules and Regulations
Following the successful one-day stockbrokers’ retreat that was organized in response to the Central Bank directive to banks on minimum shareholders’ fund, The Exchange is finalizing work on the review of its Rules and Regulations, incorporating observations made at the retreat. The revised Rules and Regulations will encompass changes in our operating environment, enabling The Exchange and operators to get a firmer grip on regulatory and operational issues in the market and thereby improve on efficiency in service delivery.

Ø Automation of Bond Market
Ahead of the listing of the N150 billion Federal Government Bond during the year, The Exchange had successfully transited from manual trading of debt securities to electronic trading, just as is done in the equities sector of the market. The benefit in this is reflected in the ease and speed with which transactions are now executed and reported in the bonds sector of the market.

Ø E-Bonus
The Securities and Exchange Commission (SEC) during the year granted approval for the dematerialization of bonus shares, The Exchange, working with the Central Securities Clearing System Limited (CSCS) and representatives of registrars, is in the process of issuing an exposure draft of the guidelines for the dematerialization of bonus shares by quoted companies. The process will enhance our market efficiency and unlock more investment opportunities in the market.

Ø Investor Education
In view of the importance of investor education to the operations of the stock market, The Exchange in 2004 sustained its investor education initiative, with the organization of international investment roadshows and National Essay Competition for secondary schools and tertiary institutions. The roadshows took The Exchange and some of its dealing members to Washington DC, Atlanta, New York, London and Nairobi.

Also, The Exchange and major market operators participated in the Financial Conference organized by Corporate Council on Africa in New York, United States of America.

In February, The Exchange in collaboration with Cross River State government organized a two-day stakeholders’ forum on the TINAPA Project in Lagos, with a view to promoting local awareness for the workings of the derivatives market. In furtherance of this objective, The Exchange organized workshops on Derivatives Market and Asset Securitization in March and May, respectively. Dealing members of The Exchange and other interest groups participated actively in the three programmes.

In July, The Exchange organized the biennial conference of directors and Chief Executive Officers of Quoted Companies and other stakeholders in the financial market in Abuja. The conference was instituted to strengthen the relationship with the issuers of securities, market operators and other stakeholders as part of the overall effort to enhance development of the stock market.

On October 5, we held the 28th edition of The Nigerian Stock Exchange Annual President’s Merit Award ceremony in Abuja. The President and Commander in Chief of the Armed Forces, Chief Olusegun Obasanjo was the Special Guest of Honour. Oando Plc won the Quoted Company of the Year award, while First Bank of Nigeria Plc was the runner-up. Awards were conferred on 17 quoted companies drawn from 15 industrial groups.

Ø Trade Alert
In collaboration with the CSCS, the Trade Alert was introduced during the year to notify subscribing investors of transactions in their accounts in the depository. This is the first of its kind in any stock exchange and we are confident that the system will go a long way in discouraging unauthorized transactions on clients’ accounts and provide investors with timely market information.

8.0 FUTURE OUTLOOK

We are optimistic about economic prospect in 2005.

We hope that the privatization programme would be energized in 2005 with the planned sale of some pseudo-monopoly corporations like NITEL, refineries/petrochemical plants, Pipeline and Products Marketing Company (PPMC), NICON Insurance, Peugeot Automobile of Nigeria (PAN), and Volkswagen of Nigeria.

The on-going consolidation programme in the financial sector has placed enormous responsibility on the stock market. However, we are confident that with the level of investors’ awareness, we will continue to achieve high level of investor patronage of issues.