It can be argued that there is a strong, positive relationship between the economic development of a nation and the degree of sophistication of its capital market structures.
For context, while the United States of America boasts of a world-leading $23-trillion economy, its different capital markets have a combined valuation estimated at double that figure. In contrast, Burundi, one of the world’s poorest nations, has no defined capital market ecosystem despite little or no restrictions on portfolio investments.
From 1980 through 2007, the world’s financial assets—including equities, private & public debt, and bank deposits—nearly quadrupled relative to global GDP. Global capital flows similarly surged, induced by advancement in information and communication technology, liberalization of commerce, and innovative service offerings. Despite the disruptions caused by the global financial crisis of 2008, capital market functions have continued to provide a solid bedrock for economic growth by enhancing foreign inflows to developing markets.
Similar to global patterns, the Nigerian capital market has continued to evolve, positioning itself as one of the best in Africa through the adoption of technology and improvements in process flows. Despite prevailing macroeconomic headwinds, the domestic market remains attractive to foreign investors, leading to over $60 billion in capital inflows into both the equities and debt market in the last decade. With this in view, PwC postulated that Nigeria will be amongst the top 12 countries that will lead capital raising by 2030, surpassing Russia, Saudi Arabia, Netherlands, and Thailand.
Furthermore, with well-functioning policy and regulatory frameworks, product innovation continues to be driven by the enhanced capacity of key market intermediaries, such as Issuing Houses and Stockbrokers. The actions of these intermediaries have aided a 61% year-on-year increase in trade value to N1.7 trillion as of June 2022 on the Nigerian Stock Exchange. Two important acquisition deals contributed significantly to this: Titan Trust Bank Limited’s acquisition of Union Bank of Nigeria Plc (valued at N191 billion or $461 million) and Flour Mills of Nigeria Plc’s acquisition of a 77% stake in Honeywell Flour Mills Plc (valued at N25 billion).
A key player on both transactions was CardinalStone Securities Limited, the wholly owned securities trading subsidiary of CardinalStone Partners Limited. While currently occupying the top spot as the leading stockbroker In Nigeria by volume and value of transactions done in 2022, CardinalStone Securities was solely responsible for executing the Union Bank deal and acted for the seller, Honeywell Group Limited in the Honeywell Flour Mills sale. For context, the Union Bank sale is the largest transaction ever in the history of the Nigerian Stock Exchange, outstripping the divestment of 3.2% of Dangote Cement Plc by Dangote Industries Limited (valued at N125 billion or $346 million). These feats by CardinalStone would have come as no surprise to astute market observers, who have seen the progressive rise in the firm’s market share from 1% in 2013 to 31% as of June 2022.
Without a doubt, the health of a nation’s economy is highly dependent on the state of its capital market and the activities of regulated and reputable players like CardinalStone, and supportive regulatory action, remain a long-term tailwind for market growth, development and prosperity of the country.