By Peter Egwuatu
Against the backdrop of persistent bearish sentiment in the Nigerian stock market, security dealers are now seeking for a re-introduction of margin loans in the market while calling for government participation in the actual trading investments in the market.
These measures, according to the Association of Securities Dealing Houses of Nigeria (ASHON), would address the challenge of weak liquidity that has undermined market rallies persistently.
Notably, margin lending had caused a huge bubble of bullish market between 2005 and 2009, which created liquidity crises in banks following the eventual bubble burst.
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Pressing for this new shift ASHON’s Chairman, Chief Onyenwechukwu Ezeagu, stated: “The Central Bank of Nigeria (CBN) should reintroduce the margin facility to help improve liquidity in the market.
“It should, in conjunction with capital market operators, design effective guidelines that will de-risk the product to avert past experiences in margin lending in the market. The margin terms and conditions should also be reviewed in line with the current realities.
“The government should patronize the capital market; the taste of the pudding is in the eating.
Thus, will spur others, including foreign investors to believe in the market. The government should urgently consider the proposal by the Securities Dealing Community ably represented by the Chartered Institute of Stockbrokers (CIS) and the ASHON through the Capital Market Master Plan Implementation Committee (CAMMIC) on the rejuvenation of the market as part of the financial system review currently being worked on.”
While commenting on the resilience of the market, Ezeagu said: “The stock market could be said to have become resilient to upheavals in the economy but with the heightened insecurity, we want to believe that the market will survive given that opinion leaders have continually advised the actors to jaw-jaw rather than war-war. We all need to tone down our words and actions for our country to avert catastrophe and ensure that our economy is sustained.
“The successful completion of the demutualization process was a great delight to Securities Dealers. Our members have eagerly expected this transition with high hope. We expect to reap the benefits of shareholding in a fledgling stock exchange, one of the best in Africa.”