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Expert decries capital market instability

A finance and investment analyst, Dr. Martin Oluba, has blamed the continued stagnancy and instability in the Nigerian capital market on lack of proper research and analytical tools used by the authorities of the market, stockbroking firms and other stakeholders.

Oluba, who is the President/Chief Executive Officer, ValueFronteira Limted, lamented the inability of firms, stockbroking houses and the regulatory authorities to understand the importance of proper research and analysis, a development, he blamed on a number of factors.

One of the factors responsible for instability in the market, according to him , is stakeholders’ inability to undertake proper research and analysis, a development, he said grows out of an unfounded fear that using analytical tools requires the knowledge of statistics.  According to him, “ businesses operators find it more convenient to keep operational staff rather than analytical research or forecasting staff.”

“Furthermore, many companies do not think that they have the tools to get required data out of their systems. Implied here is that they do not have the expertise or time to unleash their data and put it into a usable format in a timely manner that allows them to communicate decisions effectively.”

Speaking further, Oluba noted, “There is also management bias towards non quantitative decision making because (a) decision making based on thorough analytics eliminate the possibilities of internal politics that is cherished by many, (b) those who have spent several years in the business believe that they know all that needs to be known and can therefore, reliably depend on their gut feelings and intuition.

Sometimes it can be, because built models might be answering the wrong questions, are un-implementable, un-interpretable, and are not translated in terms that leadership would appreciate.”

Oluba advised that to develop the Nigerian capital market, there is need for the aggressive acquisition of research and analytic skills by stockbroking firms, adding that the immediate market-wide advantage is that it will eliminate the undue information transmission lag that had hitherto given undue information advantage to a few players in the industry with some semblance of such capabilities.

According to Oluba, this somewhat oligopolistic structure of the market is not the best. “Similarly, for effective regulation and monitoring, the members of staff of the Nigerian Stock Exchange (NSE) and those of the Securities and Exchange Commission (SEC) equally need to be adequately trained in this expertise.

“Without such competencies equally domiciled with these regulators, it will be very difficult for them to catch up with the speed of events that will be the positive resulting consequence,” he said.

He continued, “Stockbroking responsibilities do not necessarily comprise only the tasks related to trading in stocks or commodities.

Brokers may wear different professional costumes that may differentiate them variously as securities analysts, investment analysts, stock analysts, dealers, advisors, among others.

“Investment analysts for instance study companies’ financial reports, evaluate market data using appropriate statistical techniques, understand and predict market performance and its future direction”.


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