Worried by the dwindling state of the equities market in the last few months, stakeholders have proffered various suggestions on what the market regulators and the Federal Government could do to boost activities and improve market depth. UDEME EKWERE writes.In the last 10 months, the market capitalisation of the listed equities has recorded a loss of N2.3tn.The market capitalization, which had reached the years peak of N8.885tn on January 25, 2011, began a steady decline from that period, closing at N6.627tn on the last trading day of October.This translates into a decline of N2.3tn or 25 per cent drop in investors holdings in the equities market.The losses recorded in the nations capital market have continued to be a topic of discourse among investors, who were once interested in playing at the market.These investors, who have lost over a third of their investments in the market, have said that they do not see themselves coming back into the market, no matter how low-priced the shares are currently.For instance, Mr. Jacob Aderigbigbe, an investor, said that as at 2008, his companys worth in the capital market stood at about N3.5m.He says, Because I was an avid investor, on behalf of my company, I bought into almost all the banks that had Initial Public Offers at the time. So, when the bang came, it was overwhelming for the company and I.During the peak of the crisis, I managed to sell out about N500,000 worth of some of my banks shares, which I invested in some others. But before I knew it, the portfolio was down to just above N750,000. Presently, it is now hovering between N350,000 and N450,000. It is rather unfortunate, he says.He laments further, I do not know what it is that can be done to salvage the market, because things have really gone bad, and I hope that finally, the regulators and the government would stand up to their responsibilities and save our market from total collapse.The market capitalisation is the total value of all the shares listed on the Nigerian Stock Exchange. It is obtained by multiplying the share price of each company by the total number of shares in issue, and this provides a total value for all the listed shares.Also, the NSEs All-Share Index is the amount derived from calculating the current market prices of the traded shares on the Exchange.The problem in the equities market began towards the end of 2008, with the market capitalisation suffering the highest fall in its 48-year history, shedding 45 per cent or over N5tn to close at N6.8tn.In 2009, due to the Central Bank of Nigerias clampdown on some banks due to gross misconduct, the market capitalisation was down to N4.989tn, while the NSE All-Share Index fell to 20,838.90 points.However, on the news of the purchase of the toxic assets of banks by Asset Management Corporation of Nigeria, the index increased by 18.5 per cent to close at 27,770.52 points, while the capitalisation rose to N7.91tn at the end of 2010.Nevertheless, after the Januarys peak record, a measure of instability has continued to be recorded in the market. Market analysts have traced this to both local and global major challenges, which, according to them, have contributed to the declining fortunes of the Nigerian stock market.Accordingly, stakeholders have been proffering various solutions to the challenges in the market, with most of them agreeing that as a matter of urgency, the Federal Government should make policy statements that would boost activities in the market.For instance, the Executive Governor, Bauchi State, Mallam Isa Yuguda, said at a lecture on Thursday that reviving the market had become a collective duty of all stakeholders, including market operators, financial regulators, and even, governments at all levels.According to him, the capital market is a major avenue for driving infrastructural development, and it must be protected as much as possible to ensure that investor confidence is not eroded.In his suggestion to the Federal Government, Yuguda said, It is important that government aligns with quoted firms on the NSE and also to ensure that they are given priority when it comes to award of contracts. That way, investors would enjoy the benefits from such an action, and would be more encouraged to put their funds in the market.Also, as part of incentives to lure new listings into the equities market, the Federal Government can ensure that such companies enjoy tax holidays of between four and five years. This would have the positive effect of encouraging more firms to list, thus boosting liquidity in the market.Yuguda, who agreed that one of the major problems facing the market currently was that of illiquidity, also noted that inadequate investor protection, lack of market depth, loss of investor confidence in the capital market, attraction and sustenance of Foreign Direct Investments in the capital market were major challenges impeding the growth of the Exchange.The President, ASHON, Mr. Rasheed Yusuf, urged the government to look inwards and ensure that the challenges of the economy were fixed so that more people, especially foreign investors, would be attracted to the market.He said, There is the need to draw attention of the government and policy makers to the situation in the market. The market is currently not performing well, and this is as a result of the dwindling economy. So, the government should be informed on the need to put the capital market back on track.There is, therefore, the need for the government to take urgent step in fixing the economy so as to ensure the growth of the capital market.Speaking on behalf of quoted companies on the Exchange, the Managing Director, Flour Mills of Nigeria Plc, Mr. Emmanuel Ukpabi, said that the NSE had a lot of work to do to ensure that investors returned to invest in the market.He said, It is alarming to note that most of shares on the NSEs Daily Official List are currently selling far below their real value, and this is as a result of the continuous losses recorded in the market since the beginning of the year. However, what some investors may not know is that this is actually the right time to make some informed investment decision.Therefore, what I would suggest is that the market regulators such as the NSE and the SEC, do all they can to restore investor-confidence in the market. They have a monumental challenge to ensure that the dwindling confidence in the market is restored.The Chief Executive Officer, NSE, Mr. Oscar Onyema, said that the market needed some government intervention, just like was done in the banking sector. He also agreed that tax breaks were necessary to ensure more participation in the market, adding that this would increase depth and liquidity in the market.He noted that on its own part, the market regulators, including the NSE and Securities and Exchange Commission had a major role to play. He added that to this end, the NSE had been involved in various short-term and long-term programmes aimed at restoring investor confidence in the market, with a view to making sure that funds that had been withdrawn from the market were brought back into the market.We are putting things in place to ensure that there is the ability for companies, who feel that their share prices are too low, to buy back their shares, thus optimising their capital structure, he stated.
Click here to read full news..
