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Mixed feelings trail capital market development

By Peter Egwuatu

STAKEHOLDERS in the Nigerian capital market had shown mixed feelings in the development of the Nigerian capital market as some of them said the market has done well while others said more need to be done.
The recent fall in the stock prices on the Nigerian Stock Exchange (NSE) remains indelible in the minds of many investors and other stakeholders in the Nigerian economy.The Nigerian Stock Exchange (NSE) All_Share Index (ASI) which is one of the barometers that currently provides a composite picture of the performance of 293 listed equities on the Exchange   starting with an index value of 100 in 1984,  with increased listings and financial activity, it attained a value of  57,990 at the end of year 2007.

It started the year 2008 at 58,580 points basis (with a market capitalization of N10.284 trillion), and went on to achieve its highest value ever at 66,371 points  on March 5, 2008,with a market capitalization of about N12.640 trillion.

However, ever since that high, the ASI has inescapably declined, exhibiting a bear phase till the year end and closed at 31,182.45 points on 29th December 2008.In terms of capital decline, measured by market capitalisation , the Nigerian capital market has since the March 5, 2008 lost to date , Tuesday, 29, 2009 about N7.481 trillion or 59.19 per cent.

The Nigerian capital market has never experienced such a downturn and the investors were hoping the same returns during the year 2008 . The investors and stakeholders leveraged on financial activities which worsened the situation. The leverage positions of stock broking firms, institutional investors and high net worth individuals has  made some of the stocks over valued.

But with the withdrawal of Margin Funds and Central Bank of Nigeria ( CBN ) mandated banks to have December 2008 as their common financial year end , the market took a reversal trend as banks started taking deposits at high rates so as to give a face_lift of their balance sheets. All these impacted negatively on the market.

The Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie in his reaction on the how far the capital market has fared , said the Nigerian capital market has contributed in no small measure to the growth of the economy.

According to him, “ The management of the NSE, has provided the needed leadership that help reposition the stock market to be one of the best in the world. The Exchange has provided a platform through which a large number shareholders and other participants were transformed from poverty to  affluence. The Exchange has helped companies to float issues and raised funds from the market.

Continuing he said, “ The NSE has contributed to the growth of the economy. Despite the challenges, one can not rule out the fact that the Exchange has not done  well. The floor of the Exchange has turned many Nigerians to billionaires.
“In terms of revolution, the Exchange can be rated as one of the best in the world.

The management has been able to provide needed leadership to reposition the Stock Exchange. Now, you can stay within the comfort of your office to do trading without losing anything which is highly commendable.The only thing the NSE need to do is to study what led to this persistent fall in share price and be able to learn from it.”

The National Coordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu said the Nigerian capital market  has done well at 49. He, however, stated that the stock market  would have done better, if not for some political decisions which he said has adversely affected the market.

He expressed optimism that the market would rebound, despite the persistent lull recorded in the last few months.Other shareholders who spoke on the how far the market has fared at 49 years said “The NSE is still on the verge of development due to inconsistency in the economy.

They pointed out that if the government would facilitate the growth of other sectors of the economy, it would help impact positively on the NSE adding that the Exchange would continue to record failure if other sectors of the economy are neglected.“If different sectors of the economy is growing, the stock market will begin to stabilise.

The capital market mirrors the true state of other sectors of the economy such as the manufacturing sector” they added.Other factor they stated impacted negatively on the capital market was the regulatory lapses. According to them, the regulators were carried away by the burbling experienced then in the market and went to sleep without checking the excesses.


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