…Investors advise against duplication of rules, regulation

By William Jimoh

The fact that foreign investors account for large chunk of transactions in the Nigerian capital market in spite of the persistent insecurity in the North-Eastern part of the country has been described as good indication for the progress of the market by the regulators and confidence in the market by foreign investors.

Contrary to this view, some investors who spoke with Vanguard Investors Forum believe the development reveals that foreign investors are only taking advantage of the fact that the domestic investors have not fully recovered from their losses following the market melt-down. Excerpt;

ANTHONY Omojola, Investment analyst, Credible Associates Ltd:

The foreign investors are taking advantage of the prevailing situation in the capital market by taking between 65 and 70 percent of the market shareholding volume.
This is a result of the fact that domestic investors are yet to recover from the shock and the losses they incurred during the market meltdown of some years ago.

The regulator is currently working, contrary to the belief of most shareholders in the past that they are not proactive enough when it comes to carrying out their oversight function. In fact, one may be tempted to say that they are now over-regulating considering the various policies that are currently in place to ensure that the market recovers and be in a position to lead other markets in the continent while competing with others in the global capital market.

One thing that the regulators – the Nigerian Stock Exchange, NSE, Securities and Exchange Commission, SEC, and the other stakeholders need to ensure at the moment is that, before they enact a policy, they should ensure that all the stakeholders including the investors are carried along so that such policy will not be duplicated.

For instance, if the NSE should carry the Securities and Exchange Commission along while putting their policies in place, aside the fact that this will not allow for duplication of functions and policies, it will also curb over regulation.Once this is considered properly, the market will be in a position to take its rightful place among her counterparts.

The implication of foreign investors occupying up to 70 percent of the shareholding volume is that when these people buy stocks, they always hold on to it and it is usually for very long time and when eventually they decide to sell, it is usually at a very high price which minority shareholders may not be able to afford. It is therefore very important that domestic shareholders begin to see reasons why they need to also invest and if they had invested already, they may need to increase the volume.

On the issue of domestic investors’ confidence in the market and the percentage they currently hold, it is going to be a gradual process because it is not easy to recover from losses these category of investors suffered over the years. But with the current activities and position of the regulators in ensuring that the domestic investors’ confidence returns, it will not be long before they come back.

Mr. Godwin Anono, Chairman, Nigeria Professional Shareholders Association:
The increased presence of foreign investors in the market is like a double edged sword because just as it has a positive impact on the market, it is not encouraging when we talk about building and growing the confidence of minority shareholders in the market.

Currently, the foreign investors are not really making money from their investment, but they open their two eyes waiting for a time when the opportunity will prop up in the capital market. They only put their money in the market with their two eyes well open awaiting an opportunity to make money and if things get bad, they retrieve their money and move out of the market, leaving the domestic shareholders.

But for the domestic shareholders, home will always remain home. Whether the deal is good or not, we have always been so consistent.
And as for the regulators, they are not regulating well. For example, if you look at the issue of the insurance sector, they are not helping matters at all. Looking at the activities of companies such as Goldlink, it is glaring that the regulators are not actually protecting the interest of the small investors.

On investors’ confidence, we have different types of investors, there are some who are just buying and selling. When these categories of investors invest and they discover that they have recorded little appreciation, they sell.

We also have the long term investors who invest but in spite of all odds, they still hold on to their investment; awaiting capital appreciation also. The third category is the dividend paying investors; before they buy shares of companies, they want to be sure that the company will declare dividend. To them, it is only companies that declare dividends that they consider as active companies.

But what determines whether a shareholder will continue to hold the shares of any company depends on the motive for which he/she invested.