REPORT OF THE STUDY ON SHARE OWNERSHIP PATTERN OF QUOTED COMPANIES IN NIGERIA (2002 – 2004)

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1. STUDY OBJECTIVE

The objective of the study is mainly to determine the proportional holdings of various categories of investors in quoted companies on The Nigerian Stock Exchange (NSE) and the market float in Nigeria. Market float is the proportion of shares listed on a stock exchange, which is available for trading. This has an impact on the liquidity of the market. Investors’ holdings on sectoral basis are also determined.

 

2. METHODOLOGY

The study was carried out through administration of questionnaires to registrars which maintain membership registers of quoted companies. The survey covers a three (3) year period (2002 – 2004).

 

3. SCOPE

A total of 195 questionnaires were administered to registrars of quoted companies for 2002, out of which 151 were retrieved while for 2003, 164 completed questionnaires were returned out of the 200 administered questionnaires. 2004 witnessed the return of 164 completed questionnaires, out of the administered 207. The percentage coverage for the three (3) years stood at 77.4 percent, 82.0 percent and 79.2 percent in 2002, 2003 and 2004 respectively. Consequently, analysis was done based on the available data as indicated in table 1.

 

Table1

 

 

 

 

 

DATA ANALYSIS AND PRESENTATION

Shares outstanding

The study revealed that the number of shares outstanding of quoted companies on The NSE rose from 81.6 billion in 2002 to 129.4 billion in 2003, representing 58.6 percent increase. By 2004, the outstanding shares had risen to 187.6 billion to establish an increase of 45.0 percent. Between 2002 and 2004 however, the number of shares outstanding appreciated by 129.9 percent.

The increase in the number of shares outstanding was principally as a result of creation of additional shares by some companies through the floatation of new issues (offer for subscription, rights, bonus etc) in order to boost their capital base in anticipation to meet statutory requirements, among others. For instance, since the CBN’s pronouncement of the N25 billion minimum capital base for banks in July 2004, the new issues market had been dominated by banks. In essence, of the 28 companies which raised issues between July and December 2004, 13 were banks, representing 46.4 percent.

The listing of twelve (12) companies on The NSE between 2002 and 2004 was another contributing factor to the increase in number of shares outstanding during the reviewed years.

Analysis of shares outstanding on individual company basis showed that, Oceanic Bank International Plc, which came on the main board of The NSE, specifically in June 2004, was supreme over others, having recorded 9.3 billion shares for the year 2004. With this figure, the bank controlled 9.1 percent of the top 20 and 5.0 percent of the total shares outstanding. IMB International Bank Plc posted 7.8 billion shares to occupy the second position, which represented 7.7 percent of the top twenty (20) and 4.2 percent of the aggregate shares outstanding.

With 7.6 billion shares outstanding, Nigerian Breweries Plc settled at the third position. The figure represented 7.4 percent of the top 20 and 4.0 percent of the overall shares outstanding. Union Bank Nigeria Plc was at the fourth position, having registered 6.5 billion to represent 6.4 percent of the top 20 and 3.5 percent of the total shares outstanding. Unilever Nigeria Plc, with 6.4 billion shares outstanding, came fifth. This controlled 6.3 percent of the top 20 and 3.4 percent of the aggregate shares issued. First Bank Nigeria Plc was last on the table of the top 20 companies with the highest number of shares. The bank had recorded 3.6 billion shares, which represented 3.5 percent of the top 20 and 1.9 percent of the total shares outstanding. Intercontinental Bank Plc, with 3.6 billion shares, recorded the nineteenth position.

 

Shareholders

In terms of shareholders, the total number which stood at 3,411,766 in 2002 rose by 14.6 percent to 3,910,758 in 2003. This appreciated further to 4,492,602 in 2004 to establish a substantial increase of 1,080,836 or 31.7 percent over the figure for 2002.

On individual basis, with 288,591 shareholders, Oando Nigeria Plc posted the highest in 2004. This represented 11.3 percent of the top 20 and 6.4 percent of the total number of shareholders. Zenith International Bank Plc was second as it recorded 286,947 shareholders, which represented 11.2 percent of the top 20 and 6.4 percent of the aggregate shareholders.

First Bank of Nigeria Plc came third, having recorded 274,365 shareholders. This represented 10.7 percent of the top 20 and 6.1 percent of the total number of shareholders. Union Bank Nigeria Plc (226,579 shareholders) and UACN Plc (196,030 shareholders) recorded the fourth and fifth positions respectively. Ashaka Cement Plc was at the rear of the top 20 table. The company registered 59,306 shareholders, which controlled 2.3 percent of the top 20 and 1.3 percent of the aggregate shareholders. On the nineteenth position was Flour Mills Nigeria Plc with 61,799 shareholders.

 

Sectoral Distribution of Shareholdings

Analysis of sectoral distribution of shareholding revealed that the “Banking” sector had during the 3 year-study led other sectors. In 2002 for instance, the “Banking” sector posted 42.9 billion shares (the highest). This was followed by the “Conglomerates” sector with 9.9 billion. Similarly, the year 2003 witnessed the “Banking” sector posting the highest number of shares outstanding at 78.4 billion. The “Conglomerates” sector retained its second position, having recorded 11.1 billion shares.

In line with the established pattern, the “Banking” sector dominated others as it posted 116.5 billion shares outstanding in 2004. While the “Conglomerates sector recorded 12.6 billion for the second position.

In respect of number of shareholders, the “Banking” sector posted the highest with 1,030,784 in 2002, followed by the “Petroleum (Marketing)” sector at 554,248. The pattern remained in the years 2003 and 2004 as the Banking sector led others with 1,311,063 and 1,724,405 respectively. The “Petroleum (Marketing)” sector came second with 564,178 and 703,136 in 2003 and 2004 respectively.

 

Categorical (Type of Investors) Distribution of Shareholdings

Individual, institutional, states / local governments and foreign investors rose consistently during the 3 years under study. For instance, the total number of shares for individual which stood at 35.9 billion in 2002 appreciated significantly by 59.8 percent to 57.4 billion in 2003 and further to 81.2 billion in 2004. This showed a 126.2 percent increase over the figure for 2002. In the same vein, the institutional investors rose from 28.1 billion in 2002 to 76.0 billion in 2004 representing 170.5 percent increase. The states and local governments rose to 8.9 billion in 2004, from 5.9 billion in 2002. This represented an increase of 51.0 percent. The foreign investors appreciated by about one fold, from 10.6 billion in 2002 to 20.4 billion in 2004. The Federal Government, on the other hand, dropped marginally by 0.9 percent as it moved from 1.08 billion on 2002 to 1.07 billion in 2004.

 

 

Market Float

The shares held by foreign investors (direct) and governments are hardly traded on the floor of the Exchange. The market float in Nigeria, therefore, comprises mainly individual and institutional investors’ holdings. The proportional holdings of individual and institutional investors stood at 43.3 percent and 40.5 percent respectively in 2004. Thus, the market float is put at 83.8 percent. The market float had progressively improved in the last three years. For instance, it stood at 78.5 percent in 2002 and rose to 81.4 percent in 2003.

 

Conclusion

Expectedly, the individual, institutional and foreign investors had continued to increase as experienced over the years partly owing to improved infrastructural facilities and public enlightenment campaigns of the Commission. The states and local governments were also on the rise while the Federal Government dropped.

The increased number of share outstanding coupled with the market float put at 78.5 percent, 81.4 percent and 83.8 percent in 2002, 2003 and 2004 respectively have no doubt impacted positively on the liquidity of the market. This also indicated that more investors and funds users are opting for capital market for investment and raising of funds for industrial development respectively as a result of the confidence that has been built in the market over the years.