BY PETER EGWUATU
The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr Oscar Onyema disclosed that there has not been any clear fiscal policy by the federal government to uplift the Nigerian capital market.
Speaking at a public lecture organized by Business Hallmark in Lagos, Onyema said, “Government need to come out with fiscal policy that will attract investors to the capital market”
He revealed that the Nigerian capital market has low global competitive index rating and that both local and foreign investors are cautious of their investment in the country.
He noted that the low investor confidence in the stock market was partly attributed to the banking crisis, stressing that the NSE Banking index has been down by 22.4 per cent.
According to him, “With the nationalization of three banks, N30 billion was erased from the stock market in one day. Rising interest rates has further driven investors from the market to fixed income, while merging loan overhang continued to depress the market.
Other reasons adduced for the depressed market, according to him, include: Lack of liquidity and depth, low equity issuance, no Initia Public Offering (IPO) in third quarter of 2011.
Commenting on the road map to recovery of the capital market, Onyema said that the amount with the Pension Funds Administrator (PFA) could help boost liquidity in the market.
According to him, “The over N2.2 trillion pension finds could boost the market but there is need to review Pension Funds Administrators (PFAs) Asset Allocation Policy. In fact, introduction of policy compelling PFAs to build up equity baskets above the 25 per cent cap is required.
“Furthermore, Government should introduce policies aimed at encouraging large firms in Telecom, E&P, Power, and Agriculture to come to the market for funding”
The NSE boss revealed that the NSE has already introduced a new market segmentation configuration which became operative on November 1, 2011 to aid investors in decision making.
According to him, “The segmentation informs the construction of individual investment portfolios, in terms of asset allocation, providing investors the basic tools for understanding risk diversification.”
He further revealed that that the NSE will come up with rules on market making to help boost stock market activity, adding that there is the need for quoted companies to buy back their shares in order to restore confidence in the market.
According to him, “ If companies are able to buy back their shares it would guarantee investors that the shares are okay with favourable performance. Indicators.”
Onyema, also disclosed that the NSE is in the process of revising listing requirement to attract more companies to the Exchange.
According to him, “We have told stockbrokers and dealers to organize 10 or more investors so that we can educate them on portfolio management being part of our investors’ clinic initiative and we believe it will go a long way in boosting the market.”
Oscar, further highlighted the need for tax holidays for new listings, stating that taxes on transaction fees should be reduced or eliminated in order to reduce frictional costs incurred in the course of trading.