Indeed, Naira devaluation is probably the most potent weapon against the prosperity of Nigerians. Nigeria’s migration from a potential industrial power house with bustling social affluence, to a subdued and stumbling economy clearly began with the adoption of IMF’s Structural Adjustment Programme during Babangida’s regime: the chorus from International Agencies, at that time, was also that falling oil prices with an unserviced debt burden and the consequent restriction of trade credit to Nigeria, were the products of an allegedly overvalued Naira exchange rate.
By PETER EGWUATU
The recent decline in the trading activities at the Nigerian stock market has been attributed to exposure of the geo-political and currency risks facing the country.
The Group Chief Executive Officer of UBA Capital Plc , Oluwatoyin Sanni, who disclosed this during a workshop for capital market correspondents held recently in Lagos said, ”Nigerian Economy is greatly exposed to geopolitical, geo- economic and currency risks which are forcing foreign investors to withdraw their funds from the stock market.”
She stated that the Nigerian capital market is currently facing some challenges that must be addressed in order to sustain the market recovery and prevent another crash and adverse effect on the economy.
Sanni, who delivered a paper titled ‘Sustaining Capital Market Recovery’ at the workshop said, “The recent decline in the stock market activities is partly caused by the upcoming general election in 2015 as most of the foreign and local investors are being apprehensive of the likely outcome of the election. They are being cautious and thus are selling their stocks.”
According to her, “some international and local investors have withdrawn their investments in anticipation of the outcome of the election.”
Sanni further noted that the drop in oil price and perceived policy inadequacies also affected the international investors’ confidence, adding that relatively low daily traded values and low turnover are being recorded at the stock market.
She added that the insecurity in the country is also a challenge to the Nigerian stock market recovery.
According to Sanni, the low financial literacy and low financial inclusion are also part of the hindrances to the growth of the capital market, adding that the lack of diversification options is a challenge in the market as few products are available to investors.
She noted that the financial sector still dominates the trading activities on the Nigerian Stock Exchange , which invariably affects the growth of the market
She also said that the Nigeria’s Pension Fund Administrators, PFAs currently have limited exposure to equity market adding that PFAs have the opportunity to greatly increase their equity exposure as this will increase long term returns to contributors, encourage the Initial Public Offering, IPO market as this will lead to an increased absorption capacity and improved liquidity in the market.
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