By Peter Egwuatu
The capital market is a good platform for companies to showcase themselves and move the Nigerian economy forward, says Managing Director/CEO, Afrinvest West Africa, Mr.Ike Chioke.

While assessing the capital market for the past 50 years, Chioke said, “ the capital market  has come of age, and we just celebrated our own 50 years anniversary. If we take away the dark clouds that have loomed over the capital market in last one year leading to the departure of the former DG, Professor Ndi Okereke Onyiuke, I will say the capital market have done a fantastic job.

We are now at a point where we don’t have to repeat the mistakes of the past 50 years. The capital market has come in as a platform to stay, to the fact that there will be no respectable company in Nigeria that will not consider listing itself on the Stock Exchange as part of its own strategic growth directive, including those in the oil and gas sector, telecommunication sector who hitherto prefer to remain silent”.

Commenting on the volatility of the market, he said, “ what is happening in the market now is part of the typical volatility that you will experience. Sometimes, it is driven by selective factors that we can’t help. Our understanding is that many banks have decided to reduce the exposure in the market to something like 10 per cent of what it used to be. In such case, there is forced sale, when there is too much sellers than buyers, naturally the price will go down.”

Speaking further, he explained that the Central Bank of Nigeria (CBN) does not want what the banks to collapse any more, so it has been coming out with strict regulations that would make the banks do the normal business as obtained elsewhere.

According to him, “ with the combination of the sale-down which has depressed the market, the reform in the banking sector and the addition of Dangote Cement shares into the market, the stock market is actually coming to an inflation point. We may go down one or two points, because there is an uncertainty in the political structure, the end of it is that people who have a long perspective in the market must do well.

“ If you are a short time trader then you should not be in the market. What I am advising my clients is to take positions at strategic stocks that I look 2-5 years of rising. These are the companies that will drive the growth of the economy. I have a lot of confidence in the Nigerian banking sector, and I will say that some of the stocks are very good to buy. I have clear confidence in cement sector given what it represents and clearly at this price it will be a  good buy”.

Chioke further disclosed that with the introduction of Dangote Cement shares into the market, the banking sector would now account about 30 per cent of the total market capitalization  which is  very good because investors who are coming into Nigeria will see a more balanced and diversified market. “Dangote coming into the market also expands the market from 40 billion dollars to about $55 billion dollars; it might begin to sort a recovery in the capital market. We have been praying for a recovery in the capital market” he added.

While responding on what risk does the investor face in the capital market, Chioke said, “
There is always risk in the capital market, but the reason we invest in equity is because we have to look for other alternative means to make returns. We have all manners of investors’ options, you can put in money market, and it might yield up to 2 to 3 percent. Luckily, CBN has lift it  up and is coming back again, which might investor get a yield up to 7 to 10 per cent, although many banks will not pay you up to that, they might be giving you 5 per cent.

You can go into the bond market, see what F.G Bonds are doing and get security of the full support of the Federal Government, in 5years you make around 11 per cent. You might take this and consider it that there is no risk, but is the 11 percent proper for 5years? “ “

Now, if you are taking long term, may be you invest for your 5  months old baby boy against his school fees, when he will be going to Primary school in 7 years time, how many people do you think will like to take a stake in something that has long term prospect that will put N1 today and may be N1, 000 in a month. That is always a risk in itself, because investors who look at the universe will always compare short term, long term, fixed and secure, lack of security but variable returns.

The equity market comes to that, because if you look at the risk factors, you should ask yourself, will the Nigerian economy grow? Nigerian economy is getting 97 per cent GDP per capital, 10 percent GDP growth.

This is the third fastest growing economy despite all the problems that we have, we are not the ones saying it, but this is IMF saying to the CBN Governor in Washington D.C some weeks ago. Despite all the problems we still make 6.7 per cent rate, so will the Nigerian economy grow? If the economy grows, if the government tries to invest more infrastructures, will they use generator. If the government solves the power problems to the point that all of us will not have generators, will we have more money left? Yes we will have. If all these problems are solved, are we not likely to buy new homes? So,

when I add all that, I came to realize that there are some things that are tied to the natural growth of the economy. A situation, whereby people who want to make an investment sit back and allow all the momentum of the economy to carry all of them.

Another option is to say that Nigeria economy is not going to grow anyway, we are not going to invest in cement by that time it doesn’t really matter because all of us would have been impoverished.

I am a rational man and I want to believe that even if Jonathan doesn’t get re-elected, that is another step that he will want to take. Who is likely to get it, is it Atiku or IBB or Saraki, even if he doesn’t get re-elected I think there is a lot common knowledge about what the problems of Nigeria are. He will likely take some of the initiatives that Jonathan has written down. As a more intellectual approach, he begins to study the problem, he begins to structure and implement.”