By Peter Egwuatu
BGL Plc have called onÂ the Federal Government to increase the assets allocation of pension fund in stocks from the current 25 per cent to 40 per cent in order to boost activity in the capital market.
The company also called for the creation of an alternative and viable Over The Counter (OTC) market, as a way of creating liquidity in the economy.
According to the BGL Financial Monitor, there is need for governmentÂ to encourage listing of companies shares on the stock exchange especially in â€œ virginâ€ sectors like oil and gas, infrastructure and telecomms through tax incentives.
It further stated the need to halve the entire listing process for companies on the Nigerian Stock Exchange (NSE) as there are currently 35 sub-steps as this would go a long way in attracting companies to be listed on the Exchange.
It would be noted that the Pension Commission (PENCOM) regulation stated that a maximum ofÂ 25 per cent of the pension fund is allowed to be invested in stocks.
But financial experts have kicked against the stipulated maximum amount and then called for increase to 40 per cent in order to provide further liquidity to the stock market.
In its review of the Nigerian capital market for the financial year 2008, BGL Monitor stated that a handful of reasons have been adduced to the extended downturn such as the inevitability of a correction , rock induced economic lukewarmness, regulatory flip-flops, the non-availability of credit in the Nigerian financial system etc.
It stressed that analysts point to the inflationary effects of interest rate increments particularly in the interbank market; the non release of the 2008 budgetary funds, the Central Bank of Nigeria (CBN)â€™s pronouncement of a proposed uniform accounting year-end for banks (leading to aggressive deposit generation to boost balance sheet) and further drop in Foreign Direct Investment (FDI) from 10.7 per cent in 2007 to US12.5 billion as well as a decline in foreign portfolio investments.
According to the BGL Monitor, â€œ Common to all these is palpable drop in confidence-the lifeline of any financial system. Little typifies the paucity of investor appetite for equities latterly like the snub that followed blue chip operating results of double or even triple digit earnings growth.â€
It further noted that the initial regulatory intervention to stem the market slide did go some way to obviate panic but did prove inadequate when resumption of longer term growth of the market was considered
According to it, local market operators have described regulatory moves as neccessary but not far reaching. While JP Morganâ€™s Andrew Cuffe has said the interventions will raise concerns amongst international investors.
It notedÂ the CBN moveÂ for putting off the uniform accounting year end for banks as it seemed to have propelled frantic and possibly disruptive -efforts to cover questionable positions on the interbank market from a handful of banks andÂ finally clarifiedÂ its position on the capital and money market trends by reiterating support for trading positions, including controversial margin trading stakes late September, 2008.