As the persistent depression of the Nigerian economy continues to take its toll on the nation’s capital market, financial experts have called on the Federal Government to inject the system with liquidity. Nigerian stock market lost about N1.6trillion 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.
Specifically, market capitalisation 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, 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.