Stock brokers say 10% trading band won’t attract hot money

 Association of Stockbroking Houses of Nigeria (ASHON) has dismissed recent pronouncements linked to Sanusi Lamido Sanusi, governor, Central Bank of Nigeria (CBN) that plans to allow all stocks price movement at the Nigerian Stock Exchange (NSE) to rise up to 10 percent daily from the current 5 percent would attract hot money.

Currently, at the Nigerian bourse, only stocks in the market making baskets are trading up to 10 percent band per day.

Mounir H. Gwarzo, executive commissioner, operations of SEC, had noted that in the next couple of weeks, all stocks trading band would be raised from 5 percent to 10 percent, adding that “it is not only the market making stocks that are going to be trading at 10 percent band.”

Emeka Madubuike, president, ASHON, told BusinessDay on the sideline of the association’s briefing ahead of its forthcoming maiden capital market night that “if the reforms going on in the market continue, all the said hot money would become cold money. In all, what matters is effective regulation. When you bring new processes and policies, you test them.”

He said: “If all stock prices are allowed to rise up to 10 percent per day, it will be watched to know whether it has positive or negative impact on the market. The NSE is capable of taking decisions against anything that is not positive to the market. This is not the only time we have thought of allowing stocks to trade up to 10 percent –about five years ago.”

Also commenting on the zero budget allocation to SEC by the National Assembly, Madubuike said zero budget allocation for SEC is capable of affecting the capital market negatively.

“It is not good for market development. We believe that anything that would affect market negatively shouldn’t go ahead.”

ASHON is a recognised trade group within the capital market. As a member of the Capital Market Committee (CMC), it meets regularly with regulators like Securities and Exchange Commission (SEC) and self-regulatory organisations (SROs) like Nigerian Stock Exchange (NSE) on how to move the capital market forward.

Already, analysts have said that if the zero allocation to SEC continues, it is capable of resulting to crisis of confidence which might hit the already rebounding stock market.

The House of Representatives had in a letter to SEC’s director, finance and administration, warned the management of the commission not to spend any fund on its operations this year unless approved by the National Assembly. The letter, which was written by Moruf Akinderu-Fatai, chairman, House Committee on Legislative Compliance, also stated that spending any fund without the authorisation of the National Assembly would be a breach of the 2013 Appropriation Act.

 

IHEANYI NWACHUKWU