Ten out of 156 listed firms hold N25.62 trillion of the N33.1 trillion total market capitalisation of the Nigerian Exchange (NGX), or 77.1 percent of the market valuation in a period of six months.
The 10 businesses 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.
There were 156 businesses listed on the NGX as of June 30, 2023, with a total market capitalization of N33.198 trillion.
The market capitalization of the stocks on the NGX measures the total value of the stocks held by all the firms that are listed on the Exchange.
As a company's stock is often categorised as big-cap, mid-cap, or small-cap, these ten stocks (referred to as large cap) dictate the direction of market trading through positive or negative performance.
With a market capitalization of N5.565 trillion, or 16.76% of the total market capitalization of stocks as of June 30, 2023, MTNN has overtaken as the highest capitalised company on the NGX. Market capitalization for Airtel Africa was valued at N4.960 trillion, down from N6.145 trillion on January 2, 2023, while Dangote Cement was valued at N4.857 trillion.
BUA Foods capitalization increased by N1.274 trillion in six months, reaching N2.444 trillion, while BUA Cement's overall capitalization was N3.124 trillion.
While Guaranty Trust Holding Company (GTCO) registered a half-year rise of N353 billion to N1.030 trillion, Zenith Bank's total capitalization increased by N298 billion to N1.075 trillion.
As of June 30, 2023, the market capitalization of Nestle Nigeria, Seplat Energy, and Geregu Power was N999.820 billion, N823.705 billion, and N750 billion, respectively.
The performance of the stock market in 2023 has continued the upward trend that began in 2022.
The NGX All Share Index had a year-to-date (YTD) return of 18.5% as of June 30, 2023, thanks to strong share price performances of large-cap stocks like Dangote Cement, BUA Foods, Geregu Power, and MTNN, impressive earnings performance as well as dividend declarations, and optimism following President Bola Tinubu's inauguration speech and subsequent policy reforms, including the new FX liberalisation policy.
Moses Ojo, the chief economist and head of investment research at PanAfrican Capital Holdings, commented on this trend by stating that the price growth of these firms was fueled by strong corporate profitability and dividend payouts to shareholders.
Ojo asserts that the three businesses, who have the greatest market capitalizations on the NGX, would have an impact on the direction of the stock market if they achieve a 1% rise.
“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.
Ambrose Omorodion, the chief operating officer of InvestData Consulting Limited, ascribed the stability and categorisation of these firms' stock price appreciation, noting that "investors are always after highly capitalised stocks across the world." Pension Fund Administrators, international investors, and high-network investors are prepared to take holdings in these firms.
These businesses are defensive stocks that account for over 50% of the NGX's value.
Omordion clarified, “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 added that some of these companies are experiencing float issues because of their shareholding structures, demonstrating that the market is shallow and does not accurately reflect the size of the economy.
He stated that it is not good for these few companies to continue dominating the market because it does not represent the entire economy.
Government officials and market watchdogs, according to Omordion, should push businesses to list and take part.
“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.”