Still smarting from their losses in the wake of the stock market crash in 2008, many local investors are yet to regain confidence in the Nigerian capital market. As a result, foreign investors now account for a larger share of transactions on the Nigerian Stock Exchange (NSE).
Interim administrator of the NSE, Emmanuel Ikhazobor, who confirmed this, said the major challenge facing the Nigerian capital market regulators was to build confidence and put in place systems that would enhance efficiency and transparency.
He was speaking yesterday at the annual capital market conference organised by Business Day Newspaper with the theme, ‘Can Nigeria Lead Again?’
“It is true. As at yesterday (Wednesday), foreign investors accounted for 68 per cent of the volume and value of market transactions.
Confidence has not grown among local investors, who are interested in taking profit; while the foreign investors are taking longer position in the market,” Mr. Ikhazobor said.
Total market capitalisation, which peaked at about N12.6 trillion in March 2008, shed about 70 per cent in value as investors moved to alternative windows. The market has, however, been on the recovery, rising by about 18 per cent in January from the previous month’s figures.
Increase trading hours
Mr. Ikhazobor said as part of efforts to improve liquidity, the
NSE extended the trading period by two hours from 9.30am to 2.30pm in order to
attract more foreign participation. He said the extension resulted in the
increase in volume, value, and the number of deals in the market.
He further disclosed that the extension, which became effective
December 6 last year, was to be reviewed in less than six months.
“From the result we have achieved, we may not wait for six
months. We may need to increase the trading hours again in order to increase
trade on our market,” he said.
Mr. Ikhazobor also said the regulators were looking at removing
the five per cent cap on share price: “We are looking at scenarios. If we
discover that it will increase liquidity, we will tamper with that also.”
Director general of the Securities and Exchange Commission
(SEC), Arunma Oteh, said there was need for more institutional investors to
play in the market: “Traditionally, our market has been retail driven. What
will enhance liquidity in the market is if there are more institutional
investors.”
She said rather than investing directly, retail investors should
be encouraged to pool their funds together under registered investment scheme
for fund managers to invest on their behalf.
Increase investor
confidence
Ms. Oteh said as part of plans to increase investor confidence
in the market, it was putting in place effective regulation and good corporate
governance code.
“A world class market is one that engenders investor confidence,
has breadth and depth in terms of product offering, is characterised by market
integrity, a strong and transparent disclosure and accountability regime,
fosters good corporate governance, and is fair and robust, and efficient market
place,” Ms. Oteh said.
On his part, managing director of the Asset Management
Corporation of Nigeria (AMCON), Mr. Mustapha Chike-Obi, said the challenge was
to get investors back to the market and create more products to deepen the
market.
“I think we must have securities lending to encourage investors
to express themselves. Luckily, AMCON is going to end up with a large portfolio
of securities which we pledge to hold for two years at the minimum. I want to
tell you, if you want to borrow AMCON’s portfolio of shares, you have those
already. That will be a start,” Mr. Chike-Obi said.
He said operators need to rise up to the challenge of creating products that
would suit the investment needs of Nigerians.
