Capital market operators want intervention as market downturn hits harder

Stakeholders in Nigerian’s capital market are making good their push to meet with President Muhammadu Buhari on how to stabilise the capital market through friendly policies that can boost liquidity.

Recently, the Chartered Institute of Stockbrokers (CIS), Association of Stockbroking Houses of Nigeria (ASHON) and Association of Issuing Houses of Nigeria (AIHN) called on the Federal Government to make a comforting pronouncement to investing public on the state of the stock market.

They see reason in Federal Government ensuring the listing of all its privatised agencies on the Nigerian Stock Exchange (NSE) to increase market depth.

Offshore investors, who hitherto scrambled for naira assets, have started seeing their investments in Africa’s biggest economy as rather worthless papers, following recent widening margin in the local currency in the parallel market against the greenback.

Emeka Madubuike, president, ASHON, said market operators were working closely to seek audience with the government for further interaction on the state of the market.

Madubuike, who urged investors to use the opportunity in today’s stock market to increase their stakes, said privatisation of government agencies should be done through the capital market and should not be sold to some select individuals. The ASHON president attributed the lull at the equities market to supply pressures occasioned by developments at the foreign exchange market and slide in crude oil prices.

Oluwaseyi Abe, president, CIS, believed that their recommendations were in recognition that the Nigerian stock market had depreciated remarkably since the beginning of the year 2016 due to sell pressure and investor apathy, related Nigeria’s macro economy situation.

Listed Nigerian stocks have lost about N1.4 trillion this year, a development stockbrokers linked to the rapid decline of the naira value as some foreign investors continued booking profit and selling down their holdings in naira assets.

“Government should support the market by buying and warehousing shares, as it is done in advanced markets. There should be a policy for banks to operate zero interest rate to stimulate activities in the capital market.

“Stakeholders will embark on sustained enlightenment campaign to enhance capital market literacy. Government should continue with the privatisation programme in order to increase the breadth of the market. Government should raise long-term funds through the market to finance the 2016 budget deficit,” the operators said.

“Presently, the South ward direction of the market is determined by three major factors – adverse macro-economic situation largely due to a drastic drop in the price of oil; negative public sentiment, which is related to the state of the macro-economy, and retreat of foreign portfolio investors, which is related to CBN policy on foreign exchange,” according to Abe.

According to Olushekun Ariyo, immediate past president, CIS, this is the time to invest in the market as many stocks are trading below their intrinsic value, whereas their fundamentals are still strong.

The trade groups within the capital market warn that the N50 stamp duty introduced by the CBN is an added cost to capital market operators, noting that it will not help the capital market.

“Before now, market operators had canvassed the removal of stamp duty and Value Added Tax (VAT). Government succeeded in removing VAT in line with what market operators canvassed for in 2014. The stamp duty will increase cost of operation in the market,” they said.

Responding on analysts view for naira devaluation, they said devaluation must not be done in isolation of the need to diversify the economy, as “devaluation should not be for the benefit of rent seekers.

“This is the best time for people with investible funds to invest in the market to reduce their costs, and people that purchased at higher prices when the market was bullish will gain when the market stabilises,” Madubuike said.

“As a short-term measure for the immediate, the Central Bank of Nigeria (CBN) should create an intervention window for about N200 billion to be accessed by Market Makers to shore up the market. Each Market Maker should be availed of N1 billion to N10 billion. Securities and Exchange Commission (SEC) should also consider structuring accrued dividend of about N90 billion to shore up the market,” they said further.