Operators Fume Over N4.5trn Losses, Blame Government
Capital market operators have been irked by the loss of value put at about N4.5trn in the last one year, blaming the government for the slow pace of development witnessed in the nation’ s capital market, which has persisted over the years.
The operators who renewed the call on government to urgently initiate intervention measures either directly or indirectly, to help reverse the long reign of bears and revive the market, lamented that government has not invested in such a way that could encourage people to participate in the development projects.According to them, there is no visible evidence of direct or indirect government funding in the development of the market or incentives for institutions responsible for market development by providing the necessary funds and ensuring that they have proper logistics to carry people along.
Indeed, the market has been engulfed by persistent sell pressure and investors’ apathy since the first quarter of 2018, after the market had recorded significant upsurge in 2017, with an increase of N4.5 trillion in market capitalisation, which conferred it the third best performing stock exchange in the world then.Specifically, the capitalisation, which stood at N15.55 trillion as at February 28, 2018, now stands at N11.02 trillion as at Thursday, April 11, 2019, representing N4.5 trillion or 41.5 per cent loss.
Also, the All-Share Index declined by 13,982.92 points or 47.6 per cent to 29,347.62 points from 43,330.54 points achieved as at February 28, 2018.The Managing Director of Crane Securities, Mike Ezeh, said government has resorted to floating long-term bond in the international market, abandoning the domestic market.“Government is not using the capital market to raise long term bond, instead they borrow five to six years bond in the international market. But government can raise all the money from the market just like the CBN and the OMO exercise,” he said.
According to him, such intervention measures may not necessary come in form of injecting fund into the market, rather government can appoint receiving stockbrokers, target some companies and invest massively in their shares.He added that such huge investment from the government would control sell pressure, stimulate activities and attract more investors into the market.“Government can invest massively on the shares of some companies through receiving stockbrokers while ministry of finance incorporated, under federal ministry of finance would become supervising authority for such funds.
“The way it works, if they buy through them, they can target some companies, buy stocks of these companies and by the time they do this, there will be activity in the market and you see a lot of investors both foreign and local returning to the market.“It would stimulate the market with liquidity. They should not give us money but invest and when these companies pay dividend it goes to them.”
A stockbroker with Calex Securities Limited, Tunde Oyediran, stressed the need for government to fund the capital market through investing a percentage of the Sovereign Wealth Fund (SWF) into the market to cushion the effect of macroeconomic headwinds on the market.“Government can set aside a percentage of the SWF, be it five per cent or 10 per cent, as a stabilisation fund and use it to buy stocks now that the market is down to boost investors’ confidence and when the market stabilizes, they sell the stocks and regain their money.
“Stabilisation fund is used to stabilise the market when every body is selling and nobody is buying. This is when government comes into the market and releases some amount of money into the market to buy stocks and as they are buying, even the foreign investors will know that there are no fundamental issues with the listed firms,” he added.