The Chartered Institute of Stockbrokers (CIS) believes that the prospect for Nigeria’s equity market remains positive, “even if less dramatic than the outgoing year.”
“Positive rebound in global commerce / commodity markets and a moderated interest rate environment will keep equity markets on green, especially in the second half of the year”, CIS added.
“At home, the demutualization of The Nigerian Stock Exchange will be a major growth factor. We expect the sentiments of PFAs and other institutional investors towards the equity market to improve in line with the impressive performance recorded in 2020. This will give the market a sustainable fillip to continue on positive growth,” it further said.
The Chartered Institute of Stockbrokers noted this on Tuesday February 9 while presenting its annual macro-economic report titled the Nigerian economic review for 2020 and outlook for 2021 with recommendations.
The webinar was meant for economic policy makers, market regulators, investors, and all stakeholders in the Nigerian economy, where CIS noted that the entire economic outlook for 2021 is predicated on the timing and availability of vaccines to put covid-19 under control.
The Institute therefore urged Government and all concerned to move aggressively to obtain the vaccines and make them available to Nigerians as quickly as possible.
CIS assured investors that, despite the high tempo of activity in 2020, the Nigerian capital market still has a large capacity to grow, “and will continue to grow.”
CIS urged local investors in particular, to avoid panic sell-downs whenever the market goes into a short term bear cycle, saying that it is a perfectly normal character of equity markets worldwide.
“The volume and sustainability of the local investment bloc is the underlying strength of every capital market. It is important to reiterate our advice that investors should always consult qualified stockbrokers in taking any major investment decision”, it said.
“The impressive equity index performance aside, the massive (446percent) oversubscription of the FGN’s third Sukuk Bond, issued to construct and rehabilitate as many as 44 major roads across the country, has further confirmed the strong absorptive capacity of the Nigerian capital market (the DMO had initially expected to raise N150billion, but ended up raising a whopping N669.12billion from the market).
“We therefore reiterate our call for the Federal and other tiers of government to pay greater attention to supporting the development of the Nigerian capital market, given its potency in providing cost-effective long term financing for infrastructural and general economic development”, CIS said.
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The Institute also recommended that the planned privatisation projects to fund part of the FGN’s budget deficit be carried out the stock exchange, in view of the transparency and egalitarian character conferred by the medium as evidenced by the previous rounds of privatizatio
“To reduce unemployment, private sector activity needs to be significantly stimulated, while the Micro Small and Medium Scale business class should have greater access to viable long term capital. These will be effectively accomplished if the equity capital market is supported, strengthened and stabilized with continuous liquidity”, CIS stated.
Here are other recommendations by CIS
Based on the universally acknowledged principle that the money (short term) and capital (long term) markets complement each other in the economic development process, CIS called on the Central Bank of Nigeria (CBN) to extend the following structural / liquidity support to the equity arm of the Nigerian capital market: create an intervention fund for securities dealing firms, to avail them the necessary liquidity to maintain consistent position on quoted securities, thus stabilizing the market; permit banks’ stocks to qualify for investment of margin lending facilities, under strict regulatory controls, because of its significant impact on market turnover; in view of the gradual return of local investors, we enjoin the Central Bank of Nigeria to be temperate in dealing with interest rate, liquidity and yield adjustments in its monetary policy.
It further stated: “Historically, local pension funds served as the critical catalyst for stabilizing and propelling growth in the advanced economies of the world. We therefore urge the Pension Commission (PenCom) and Nigeria’s Pension Fund Administrators (PFAs) to significantly increase the percentage of pension funds invested in the Nigerian equity market. Investment of Nigerian pension funds in local equities remain less than 10percent of pension funds under management, but we strongly believe that, given the current needs and safety structures of the market, the 25percent statutory cap can be safely made a minimum figure for the PFAs.”
“CIS lauds the FGN for updating the Companies and Allied Matters Act (CAMA). We are of the opinion that the 2020 Act introduced several provisions to improve business activities in Nigeria. However, the Act also contains a few provisions that may slow down the development of the capital market and counter the spirit of the Act. We therefore urge the government to revisit the following sections in particular: Section 142, Section 171 (1), 127, and 147 (1)”.
“Similarly, FG should take cognizance of various informed opinions expressed on the provisions of the Finance Act with respect to unclaimed dividends.
“Drawing from the historic success of our last National Workshop vis a vis the 2016 economic recession, the Chartered Institute of Stockbrokers shall be holding another National Workshop in April 2021 to proffer concrete strategic actions, not just to get the country out of recession, but to lay a cogent path towards achieving double digit economic growth for the country at the shortest possible time”, it noted.
“The Workshop, which already has he consent of His Excellency, the President of the Federal Republic of Nigeria, Muhammadu Buhari, GCFR to serve as the Special Guest of Honor, will be held at the Transcorp Hilton Hotel in Abuja and beamed live virtually to millions of viewers.
“We therefore solicit the support of Nigerians and corporate bodies in attending and sponsoring the event.
We call on the National Assembly to pass the Chartered Institute of Securities and Investment Management (CISIM) Bill. The proposed Act is a necessary and fundamental tool to meet the regulatory demands of the contemporary Nigerian Capital Market in the area of training and certification, and further complements the efforts of the SEC and the various trading platforms in that regard. CIS has made maximum efforts to accommodate the interests of all the relevant trade groups in the Nigerian capital market in the Bill and remain open to any cogent suggestions”, CIS said.
