Friday November 06, 2020 / 10:00 PM / by NASD Plc/ Header Image Credit: NASD Plc
Porter's Five Forces: The Nigerian Market
The year 2020 kicked off with a high level of expectations from Economists and Analysts around the world based on predictions and analysis done in the previous year. Many countries of the world witnessed positive growth until March 2020 when the Coronavirus pandemic drove many world economies to the negatives. Africa closed the year 2019 close as Kenya and South Africa lead the list of positive growth in equity market performance.
The African market saw Nigerian Investors lose -14.6% in market value within the year 2019 while Investors in Ghana lost -9.7% in market value. The currency of major African Economies avoided the negatives in the year 2019, while the South African Rand rose in Value by 2.4%, the Nigerian naira remained the same with no increase or decrease in value. The year 2020 has seen the Nigerian naira decrease in value by -24.1% to its current state of 381 naira: 1 dollar (official window) from an initial state of 306.9 naira: 1 dollar.
Also, the world has watched as the volume of trade in the world witnessed a stunning drop of 13.0% year to date against 2019 traded volume bringing the five-year average trade volume to a stopping point of 0.52%.
Nigeria Industries Performances
The Agriculture industry closed the year 2019 with a 29% increase in GDP as this was the Industry with the highest GDP growth for that year. This was followed by the trade industry that witnessed a 16% increase in GDP. Below is a snapshot of the GDP of selected Industries for the year 2019.
Porters Five Forces and the Nigerian Market
Threat of Entry
The Nigerian Market provides its participants with a less volatile and competitive environment, prospective and aspiring players of the market are less threatened by a far lesser level of competition when compared to the more developed Economies of the world. Likewise, new entrants from other markets who would be able to leverage their existing Capital and cashflow in expanding within the Nigerian Market are more likely to perform better taking advantage of the weak level of competition. With Nigeria being an importing Country and a less producing economy with a low level of demand for its Agricultural products and raw materials, there is a lesser demand-side benefit of scale compared to other countries of the world. This discourages investment and stands as a threat to new entrants. The Economy of Nigeria has witnessed a slower growth rate this year with a negative GDP growth rate of -6.10%, a rising inflation rate which currently stands at 13.22% and an interest rate of 11.5%. This invariably has affected the prices of goods and services and consequently raw materials with an increase in the Capital requirement for investing in the Country. This is a threat to new entrants and the growth of the economy at large. With the recent increase in the interest rate and the subsequent increase in Value Added Tax by the Government, there is a continuous discouragement of Investment in the Country making it harder for new entrants to compete favorably for market share.
Power of Suppliers
It is observed that the more converged and concentrated suppliers of Industries within an Economy are, the more control and power the suppliers tend to have. The Nigerian Economy has a more diverged and diversified supplier base. Nigeria being an importing country with debt also accruing to other Economies of the world ranging from China to the United States, the Country is increasingly becoming less dependent on one Economy of the world. As the suppliers of services to the Nigerian Economy are less dependent on the Nigerian Economy for revenue with the presence of very close substitutes like Brazil and South Africa, we have in recent times seen the Nigerian Economy tilt towards satisfying the demands of major Economic Giants like China and the United States.
Power of Buyers
Due to the low number of importers of Nigerian products that there is and the decreasing level of production in Nigeria, the Country has increasingly witnessed its buyers have an upper hand in bargaining as they become more price-sensitive constantly comparing the products of the Nigerian Economy with the products of other Counties of the world.
Rivalry Among Existing Competitors
The level of competition among incumbent players within the market can determine the rate at which new entrants would be attracted to the market. Take, for example, it has over time proven to be increasingly hard to penetrate the Nigerian Banking sector. There is a high level of competition within this industry and the majority of the customer base within the industrialized parts of the Nigerian market have been captured by the existing players within the industry. It is also difficult to ignore the existence of a high Capital requirement for joining this Industry. Also, for the capital-intensive industries within the Nigerian market such as the Manufacturing Industry, the cost of exiting the Nigerian market can be high making this Industry within the Nigerian market very competitive.
The Threat of Substitutes
The Nigerian market is a developing market that has in recent times experienced a slow growth rate especially in the year 2020 due to the covid-19 pandemic and a high population growth rate. Its landscape and features are similar to other developing economies of the world and this has made it an easy substitute among other developing economies of the world. India, Brazil, South Africa, and Pakistan are a few of the many countries which would stand as an easy substitute to the Nigerian economy as they possess a similar growth rate, poverty level, and population growth rate as Nigeria.
NASD OTC Securities Exchange is the first Over-The-Counter Exchange in Nigeria known for its proven record of transparency in the market. Recognizing the current structure of several industries in Nigeria and the undeniable changes evident in the impact of the five forces discussed, NASD OTC Securities Exchange has provided Nigerian market with varieties of products to choose from. These products cut across the needs of both Publicly listed Companies and Private Institutions.
NASD OTC Securities Exchange Market closed on a positive note YTD as the market recorded an increase in performance. NASD Security Index Year to date return rose by 3.12%. Total volume traded Year-to-Date stands at 7,873,739,044 units in 1320 deals and total Value traded is N11,762,481,395.38.
Week 45 Overview
NASD OTC Securities Exchange closed the week with a negative return on NSI. The NSI return fell by -1.49% to close the week at 719.31 points against 730.22 points on the preceding Friday, October 30 2020.
In addition, Week 45 saw NASD Investors lose N8.01 Billion in value. NASD OTC Market capitalization closed at N528.38 Billion compared to N536.39 Billion in the preceding Friday, resulting from a negative movement of prices.
There was a 1841.95% increase in the total value traded during the week as week 45 saw NASD Investors trade a total of N116,775,907.10 in value compared to N6,013,340.00 in the previous week. Total trade activity for the year is valued at N11,762,481,395.38.
In a similar pattern, volume traded during the week was 573,357.00 units compared to 216,058.00 units in the previous week leading to a 165.37% increase in trade volume compared to week 44. Total volume traded for the year is 7,873,739,044 units.
Top Traded Securities by Volume
The week closed with Niger Delta Exploration and Production Plc ranking top among the four most traded securities by volume and Afriland Properties Plc as the fourth most traded stock by volume traded in the week.
Top Traded Securities by Values
The week closed with Niger Delta Exploration and Production Plc ranking top among the four most traded securities by value and Afriland Properties Plc stood as the fourth most traded Security by value for the week.
Advancers for the week
There were no advancers in the week.
Decliners for the Week
Five of NASD OTC stocks closed the week with a significant drop in value. Niger Delta Exploration and Production Plc, which currently holds a Market Capitalization of N56.19 Billion closes the week at N309.77 representing a -0.70 percent decrease from the previous close of N311.94.
Afriland Properties Plc, which currently holds a Market Capitalization of N1.89 Billion closes the week at N1.38 representing a -2.82 percent decrease from the previous close of N1.42.
FrieslandCampina Wamco Nigeria Plc, which currently holds a Market Capitalization of N132.15 Billion closes the week at N135.36 representing a -3.29 percent decrease from the previous close of N139.97.
Central Securities Clearing System Plc, which currently holds a Market Capitalization of N67.55 Billion closes the week at N13.51 representing a -3.57 percent decrease from the previous close of N14.01.
Nipco Plc, which currently holds a Market Capitalization of N11.63 Billion closes the week at N62 representing a -4.62 percent decrease from the previous close of N65.