Markets

NSE profit rebounds as transaction fees surge 130%

by David Ibidapo, Emeka Ucheaga, Sobechuckwu Eze, Cynthia Ikwuetoghu

June 12, 2018 | 4:41 pm
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The financial results of Nigeria Stock Exchange (NSE) released three days ago showed that the boost in transaction and listing fees pushed 2017 NSE total revenues to N5.87 billion.

Transaction and listing fees accounted for 88 percent of total revenue for the period, showing that NSE earnings are highly dependent on the performance of their transaction and listing businesses.

Trading volumes were up only 5 percent in 2017 but the value of the trades jumped from N577 billion to N1.07 trillion, an increase of 86 percent.

The small change in trading volume and large increase in trade value implies that market prices were significantly higher as sentiments turned bullish in 2017 from the bear market of 2016.

NSE ASI returned 42 percent in 2017 compared to 6.2 percent negative return in 2016. Therefore, there was more of buying activities in 2017 as compared to higher selling activities in 2016.

The low revenue of about N1.6 billion generated in 2016 was as a result of a severe drop of 62 percent in transaction fees from its 2015 level as Nigeria economy tumbled into a recession in 2016 which caused trading activities to fall drastically.

As the economy recovered in 2017, trading activities picked up which drove transactions fees to N3.76 billion and listing fees N1.4 billion, up 130 percent and 111 percent from their 2016 levels respectively.

Investors will therefore pay close attention to the transaction and listing activity figures from the Exchange as a precursor to the financial performance of the NSE on a quarterly and annual basis after the demutualization and listing process for the NSE is completed.

Still a cause for concern is an increase in the wage bills of the exchange despite a fall in head count. The total personnel expense was N2.7 billion, up 9.5 percent from 2016 levels despite a 10.8 percent drop in total employee headcount. A deeper dive into the employee emoluments showed that up to 22 percent of NSE employees earn more than N9.5m annually. This is down from 23 percent of staff who earned above N9.5m in 2016.

BusinessDay observed that less than a dozen staff who exited NSE in 2017 were high earning staff, that is those earning N9.5 million and above. However, this did not help in reducing the wage bill at the Exchange as personnel expenses still increased by N210 million.

Comparing the NSE with a few other large stock exchange companies across Africa, the Johannesburg stock exchange (JSE) recorded a drop in its personnel expense by 3 percent from R584.4m in 2016 to R566.6m in 2017 and in Nairobi stock exchange (NSE), total personnel expenses fell 4 percent after a 9 percent drop in the number of employees. Advancement in technology helps stock exchanges reduce an unnecessarily large workforce and improve efficiency.

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by David Ibidapo, Emeka Ucheaga, Sobechuckwu Eze, Cynthia Ikwuetoghu

June 12, 2018 | 4:41 pm
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