By Peter Egwuatu
The ongoing crisis in theÂ banking industry has been identified to affecting the continuing dwindling confidence by investors in the Nigerian capital market.
A former past President of the Nigerian Stock Exchange (NSE), Mr. Goodie Ibru has said that one of the problems with the Nigerian capital market in recent time was the banking crisis, saying â€œÂ like most banking crises, it is about taking and managing risks badly. However, this banking crisis is also destroying confidence in our capital market.â€
While commenting on the low perception of the Nigerian capital market , he lamented that the low perception has continued for so long because the government failed to act promptly to stem the tide.Â According to him, â€œ Owing to the general decline in the prices of equities quoted on The Exchange from March 2008, many investors are unwilling to patronize the market.
This is sequel to the losses they suffered in their holdings which ranged from 20% in some stocks to as high as 90% in some others.Â Consequently, not a few individual and institutional investors have already moved to money market instruments and bonds as alternatives to equity investment.Â The result is that today, the investorsâ€™ perception of the market is rather low.â€
He further stressed that issuers of securities, especially equities, have been shy to approach the market for new monies for fear of gross under-subscription of their offers noting that those who have raised funds by private placements with the promise of listing afterwards are afraid to list now because of the continuous downward trend in equities prices.
Speaking at the Chartered Institute of Stockbrokers (CIS), Seminar recently, Ibru expressed confidence that the market will bounce back provided appropriate measures are taking to bring back investorâ€™s confidence.
According to him, â€œThe market may soon regain the confidence of participants, given the recent boldÂ actions taken by the Central Bank of Nigeria to restore confidence in the financial sector.Â Â Â Therefore, if we can succeed in our current efforts to restore confidence in the financial sector, there is hope that we may also be able to restore confidence in our capital market.
He explained that capital markets are built on integrity and public confidence in their instruments, institutions and the regulatory framework. â€œ However, capital markets have not always been free of manipulative tendencies and other abuses, thus, investor protection functions in the capital market are necessary to protect investors from the manipulative tendencies of operators and issuers of securities and thereby safeguard public confidence in the market.
This is important because without investor confidence in the market, its instruments, institutions and regulatory framework, companies and government will find it difficult to raise the capital required for the modernization/expansion of production facilities and the economy suffers as a result.â€
Ibru stressed that the importance of investor protection as an element of the healthy growth and development of the capital markets cannot be overstated.