One way to halt the recurrent crash in prices of equities listed on the Nigerian Stock Exchange is for the Federal Government to mop up and hold shares to ensure market stability, says the Assistant Director, Membership and Student Affairs, Chartered Institute of Stockbrokers, Mr. Vincent Adubor, in an interview with Okechukwu NnodimAside the recent financial crisis in some parts of Europe and its impact on the Nigerian economy, what other basic factors may have contributed to the recent crash in prices of equities on the Nigerian Stock Exchange'There are one or two reasons currently affecting the nature of Nigerias capital market. One is that the market is fluctuating the way it is now because of the bond market. Bond returns are more assured and more attractive, especially during periods of increasing inflation. So whether you are sceptical or you are not afraid of how the market fares, you are guaranteed specific returns in the bond market. The liquidity position of individuals is also very low; for instance if you have invested in bonds at this time, what kind of match do you think can get in equity trade considering the fluctuations in that segment of the capital market.Then look at even banks, when the market was booming, the percentage return on savings was between one and three, and with that you often got good returns at that time. But now the interest rate is affecting the market and then confidence is slacking because the government pronunciation is not encouraging.They (government) see the capital market as not their own per say, they are yet to take it as a national entity that is faced with a national problem. For example, if the market is growing and other sectors of the economy are growing, where are you going to measure this growth' Is it not in the capital market'So if the capital market is falling, or not steady, then foreign investors will never think of investing in Nigeria because the market is showing that there is no stability.How has this negligence by the government impacted on the market'The governments position is not too clear; they may have the best hands like Dr. Ngozi Okonjo-Iweala, but if they dont do the right thing, then the investors will suffer and will leave. You will remember when we were saying the economy is recovering in the United States, and it maintained that status for some time before this period of diverse economic concerns started coming up. But in Nigeria we have never had it like that; we have not recorded any period when we can say that our economy is recovering.The only positive thing they (government) did was just to buy off the banks, to make sure they (banks) did not die because of the crisis it would have brought.What then do stakeholders expect from the government'What we are saying is that the government should put in some funds into the capital market to mop shares up and make it stable and bring back confidence. What I mean is that instead of giving cash or funds, the government can set up a window, just like Asset Management Corporation of Nigeria, and all these stocks that are just there and are not moving because of liquidity position will become tradable. In the past, it was the stockbroking firms and the banks that mopped up all these stocks to the level that they became very scarce and thereby boosted activities of the market, making the Exchange attractive to investors before the emergence of the global meltdown.So the government can use its own window to stabilise the market by mopping up and holding, since they are not in desperate need of cash like the ordinary investor, and watch the market for about a period of five years. The truth is that as they give this support, people will see that the market is stabilising and confidence will be restored gradually.But now, you cannot tell me that you will stay and see your children suffering this festive period while you have N5,000 as shares in one bank that is not doing well as expected. Even if it is N2, you will sell it and use it to do what you need to do. But this may not be the same for the government, because it cannot sell even during festivities. So the only thing the government needs to do is to come in that way, and also mop up and hold like what social security funds are doing.What does the government and the investors stand to benefit from this'Since it is government money, they will gain but it will not be immediate, because they may not be under pressure to sell. So this is the way they can come in, not to give the stockbroking firms money. For once this is done, the market will pick up and investors will start coming to invest because there will be scarcity of stocks, there will be increased intention to put more money in the market, and the governments stocks might not be released on time, for they are not under pressure to sell.But as for individual investors, you may buy one million units of First Bank shares and, by next week you may have emergency and whether the shares have fallen or not, you must release ten thousand units to solve your problem. So these are a few solutions to the many challenges of our present capital market.Analysts and some brokers occasionally call for better regulatory policies to ensure stability and boost confidence, what are your views on this'I have given some examples with that of the privatisation in the past, if the government before going ahead with privatisation fail to consider the impact it will have on prospective investors, this may not mean well for the stock market. You dont just throw equities to the gallery like that, you have not studied the basics and you are bringing up other issues. You dampen peoples morale and you dont do things that will make people think that the regulators are not steady with their policies.They should tread cautiously when privatising some agencies and when declaring some policies. In fact, it is important that they consult with stakeholders before reaching specific conclusions if they want our economy to grow beyond its present state.
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