Nigerian stock
market has lost about N1.6 trillion in the past 18 months, even as many
blue chip companies quoted on the Nigerian Stock Exchange, NSE, have
also experienced huge losses in the first six months of this year.
The Guardian reports that
specifically, market capitalization of quoted equities, which stood at
year at N11, 237 trillion as at January 5, 2015, now stands at N9, 619
trillion at the close of trading on Friday, July 29, 2016, down by N1.6
trillion or from 33,943.29 to 28,009.93.
Total transactions for the first half of
the year also decreased by 43.95 percent from N1.113 trillion recorded
in 2015 to N624.41 in 2016, a decline of N488 billion.
Furthermore, the investors are equally
irked by the free fall of equities, coupled with the unprecedented lull
that has besieged the market in the past few months, as they expressed
displeasure over what they described as “unfavourable government
policies”, calling for new strategic initiatives that will reverse the
weak micro economic scenario.
Among the factors identified as setbacks
to the market include the lack of liquidity; slamming of huge fines on
quoted firms; rising exchange rate; high interest rate; and multiple
taxation and a host of others.
The investors argued that these factors
are a disincentive to investment, while suggesting that the federal
government should as a matter of urgency, revive businesses of listed
companies, encourage local investors by reviewing the nation’s tax
system and injecting liquidity in the stock market.
Already, the investors have linked the
current depression in the market to harsh policies, which they claimed
have aggravated investors’ apathy to investment.
Citing the recent interest rate hike and
the futures placement requirement, the investors who are currently
groaning under intense hardship, argued that institutional investors are
already moving their fund to the fixed income securities.
Few weeks after the interest rate hike,
the Central Bank of Nigeria (CBN), according to them, directed banks to
provide their exposure to foreign exchange (forex), noting that this
would subject the banks to a lot of impairments that would affect
dividend payment in the current financial year.
Also, the new futures placement
requirement for forex which takes 90 days before making it available to
listed companies, according to them is dampening productivity especially
in the real sector and thereby affecting their stock prices.
Speaking on the effect of government
policies on the market, the President, Independent Shareholders
Association of Nigeria, Sir Sunny Nwosu, in a chat with The Guardian, explained that government policies have indeed affected all businesses in the country not only the stock market.
He pointed out that the recent directive that banks should provide their forex exposure would affect dividend payout.
Nwosu argued that the government
increased interest rate to woo foreign investors, but added that there
are other macroeconomic concerns that may hinder them from attracting
the needed investment.
“The economy is in recession, it will affect all businesses. The CBN has increased interest rate, which is affecting borrowing.
“To worsen it all, CBN has gone further
to say that all banks must provide forex exposure which means that the
banks would be subjected with much impairment and we will not get any
dividend.
“Those that they increase the rate
because of them will never come to Nigeria because of other
macroeconomic challenges; the Boko Haram is still there. Why don’t you
ensure that businesses in Nigeria survive the recession before
attracting people outside?
“It is indeed hard times for the capital
market and quoted companies. The regulators are not helping matters;
they are still slamming penalties to quoted companies. Government should
look at what is happening and take the right action
“The stock market will suffer while the
expected investors may not come. They should encourage local investors
and put things right so that all the listed companies will not start
leaving for the neighboring countries,” he said.
For the National Coordinator,
Progressive shareholders Association of Nigeria, Boniface Okezie, the
policies are depressing investors’ appetite for equities.
He noted that investors are already moving their funds from the stock market to money market instruments for higher yield.
“You can see what is happening; banks
are recapitalising, investors are leaving the stock market looking at
treasury bills until government policies get clearer. The market would
continue to nosedive.
“It is only God that can help us. That
is why the market has continued on a downward direction. Imagine if the
market is up for just two or three days, people will start taking profit
and this is depressing the market the more because people have to
survive.
“Scarcity of dollar affects the local
investors; there is no liquidity in the market. Investors suppose to
take advantage of the lower stock prices to increase their investment
but they are pulling their funds away from the market.”
Okezie argued that the Ministry of
Finance should work closely with the Central Bank of Nigeria (CBN) to
formulate policies that would bolster the economy.
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