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.
