Nigerian government should intervene to stem the continuing downtrend at the Nigerian stock market by mandating its relevant agencies to step into the stock market and mop up shares whenever there is steep decline.
The government should also set up a N200 billion intervention fund through the Central Bank of Nigeria (CBN) to provide concessionary funding to market makers. Market makers are the primary dealers that provide liquidity to stocks.
These were the highlights of the meeting by key capital market stakeholders in Lagos. At a press briefing on the state of the capital market in Lagos, capital market operators under the auspices of the Chartered Institute of Stockbrokers (CIS), Association of Stockbroking Houses of Nigeria (ASHON) and Association of Issuing Houses of Nigeria (AIHN) said the Nigerian government should look at examples from advanced economies and set up appropriate machineries to support its capital market in the event of undue selling pressure.
Apparently taking a cue from China which have had to intervene severally in recent period to stem falling share prices, the operators said government should take active interest in the market.
The meeting also called on the CBN to create a N200 billion intervention fund for market makers as a short-term measure to stave off the downtrend being orchestrated by divesting foreign portfolio investors.
Market operators said government should use the platform of the Nigerian capital market for funding of its 2016 budget as well as continuing privatization of government agencies and corporations.
Stakeholders also called on Securities and Exchange Commission (SEC) to structure unclaimed dividends in a way that they could be reinvested in the capital market.
Market operators said government should take a bold long-term move of instituting a zero interest policy for banks in order to discourage recourse to short-term money market instruments and to encourage long-term savings and investments.
Acting president, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, noted that the Nigerian capital market has been going through challenges that are not uncommon with other markets especially the automated markets which operate in a crest and trough pattern in response to variables in the macro economy and within the market itself.
He pointed out that the current steep decline at the stock market is due to three main factors including adverse macro-economic environment largely due to the drastic drop in the price of crude oil, negative public sentiment which is related to the state of the macro-economy and the retreat of foreign portfolio investors which is related to CBN’s policy on foreign exchange.
President, Association of Stockbroking Houses of Nigeria (ASHON), Mr Emeka Madubuike, explained that the N200 billion intervention fund would provide liquidity to the market makers such that each market maker should be able to access between N1 billion and N10 billion in concessionary funding.
He said that government should, in recognition of the importance of the capital market, make a pronouncement on the state of the market as comfort to the investing public adding that market operators are working closely to seek audience with the government for further interaction on the state of the market.
Immediate past president of CIS and executive vice chairman, Capital Asset Limited, Mr. Ariyo Olushekun advised the general investing public to take advantage of the downtrend in the market to build strong equity portfolios.
According to him, this is the time to invest in the market as many stocks are trading below their intrinsic value whereas their fundamentals are still strong.
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