Knocks as investors incur over N1tr loss in four years
Nigerian Stock Exchange
Expectations that President Muhammadu Buhari’s four years of administration would spur activities in the market and restore the exchange on a path of sustainable growth were dashed, as investors lost N1.03 trillion within the period.
Indeed, before his inauguration on May 29, 2015, the market had long lost some gains made during the boom period of 2003 to the 2007-2008 global financial crisis, which wiped off a staggering $1 trillion from the global economy, Nigerian market witnessed a new wave of losses since 2015.
Consequently, the Nigerian Stock Exchange (NSE), which grew steadily from N35.7 billion in year 2000 to the highest point of N2.6 trillion in 2008, declined to a new low as at 2016.
But after Buhari’s inauguration, hopes of increased market liquidity and investors’ confidence were rekindled.
Unfortunately, the anticipations were dashed as the nation’s capital market contributed very little to the economic development of the country in the period under review.
The initial enthusiasm that immediately greeted his victory in 2015, has since faded because investors were unable to identify any value addition to the capital market by his government.
For instance, the market capitalisation of the NSE, which stood N11.66 trillion as at May 29, 2015, now stands at N10.63 trillion as at Wednesday May 15, 2019, shedding N1.03 trillion or 9.71 per cent. The All-Share Index also depreciated from 28,902.23 points to 28, 286.88 points, representing 615.35 points or 2.2 per cent loss.
Analysts, operators and investors who spoke to The Guardian argued that the weak regulatory machinery of the market also worsened the situation with lack of supervisory board for the Securities and Exchange Commission (SEC).
Management of SEC has also been unstable, having been enmeshed by series of scandals and led by management team in acting capacity.
Specifically, the Chief Publicity Officer of Independent Shareholders Association of Nigeria, Moses Igbrude, said the present administration seems not to understand the importance of the capital market.
“Government should formulate policies that will drive inflation rate and interest rate to single digit. With appropriate policies and programmes, we can reverse the inverse yield curve being witnessed in the capital market and make the yield on equities surpass the yield on fixed income securities,” he said.
Furthermore, he suggested that government must stimulate activities in the market by initiating programmes that would help channel capital formation through the market to finance priority sectors.
“To enhance the fundamentals of the capital market, government must ensure good corporate governance in the market and also prevent asset bubbles by ensuring that stock prices appreciate in line with market fundamentals,” he added.
The President of Ibadan Zone Shareholders Association, Eric Akinduro, said: “Buhari’s administration is one of hopelessness, as nothing positive has ever happened in the market since his assumption of office.
“The capital market is one of the most volatile sector and it will take a serious minded government to revive the market and improve its performances to boost the economy.
“Market capitalisation and prices of stocks had fallen beyond expectations. We had believed that government under buhari administration will deliver positive change, but it has turned a mirage.
“His administration has not been investor-friendly. No concrete pronouncement on what direction the economy is going. Just of recent, investors lost their money in Skyebank, in addition to previous ones incurred in the time past.”
The Head of Research, FSL Securities Limited, Victor Chiazor, said: “Given our market capitalisation to Gross Domestic Product of about eight per cent, it is clear that a lot of work still needs to be done.
“Clear policy guidelines, tax incentives, access to funding, among others, from the fiscal and monetary authorities need to be put in place, to make the market attractive to corporates willing to list on the exchange. This will help deepen the market and have positive effects on the economy.”
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