BY MICHAEL EBOH
Stockbrokers in the Nigerian capital market have cautioned the authorities of the Nigerian stock market on the planned removal of the five per cent ceiling on share price movement, warning that if the peculiarities of the Nigerian market is not taken into consideration, the action is likely to lead to the collapse of the capital market.
The brokers who spoke to Vanguard in separate interviews, however, noted that a review of the price ceiling is not out place, but called for proper and wide-reaching consultations to determine its suitability to the Nigerian market.
Mr. David Adonri, Managing Director/Chief Executive Officer, Lambeth Trust and Investment Limited said, “Occasional market failure is a shocking reality in stock markets all over the world. To prevent it or ameliorate its effect, regulators utilise various suitable administrative mechanisms.
“When prices in New York Stock Exchange Falls below a certain percntage in a day, trading is automatically suspeded. In similar vein, Nigeria has adinistratively fixed a daily maximum price movement limit of five per cent to prevent extreme market volatility based on shallowness of the market. If this circuit breaker is removed, the resulting volatility could lead to market failure” .
Also speaking, Mr. Seye Adetunmbi, Chief Responsibility Officer, Value Investing Limited said, “In a free market economy and near perfect competitive market place like the NSE is supposed to be, it is not out of order to review market ceiling to the dictates of the market. What is important is that ‘Nigerian factor’ would not destroy the good intention or the initiative.
“When the market is too restrictive and does not depict the real market situation, it gives room for under the table deals whereby desperate players deal at a discount or premium outside the dealing floor.
“In as much as fundamentals will prevail on the basis for arriving at price adjustments in the market dealings from time to time, whatever policy that will help the endangered market should be encouraged.”
The brokers also advised the authorities of the capital market to put in place initiatives that will help develop the market, bring about stability and ensure a return of confidence in the market.
According to Tunde Adeyemi, Vice Chairman, DHTL Capital Management Limited, stockbrokers should be directly given a bail-out and a safe ground to start over again.
He noted that this practice which is done all over the world will not only allow the stockbrokers start again, but also ensure that they can reach investors and also give an assurance to the market.He said, “In my opinion what the Exchange should concern itself with now is how do to bring the market back to stability and restore confidence.
“It should carry out a number of measures which include: the monetary policy, though outside the coverage of the NSE, it needs to be reinvigorated and the framework re-channeled towards financial market development and not destruction. This delicate area of the economic policy have been seriously stretched and misused to the detriment of the market.
“Effective communication management from the NSE and the Securities and Exchange Commission (SEC) on delicate issue should be better managed or else efforts to restore the market will remain in effective.
Also speaking on the initiatives to be introduced, Adetunmbi said, “The market must not set too much ideals that may not suit the structure of our market vis-a-vis the operators and large retail level of marginal investors which stood by the market over the years .