Chike-Obi blames stock market downturn on illiquidity, urges government to create investible fund
For the nation capital market to record some reasonable level of improvement, government must create a fund that would be invested in it to boost liquidity.
This was the submission of the Executive Vice President, Alpha Africa Advisory Limited, Mustapha Chike-Obi while fielding questions from journalists at a press conference to announce the name change of Travant Capital in Lagos at the weekend.
Chike-Obi, who identified illiquidity as the major impediment to stock market rebound, explained that there was the need for government to establish an investible fund that would provide liquidity to the market in the period of lull while government pools the fund when there is excess liquidity in the market.
This, according to him, would help deepen the market, create higher volumes, as well as make valuation more accurate in the market.
He explained that the current value of the stock market is lower than what it were during the financial crises, adding that no foreign investor will invest in a market that would not generate capital appreciation for investment.
“The stock market value today is lower than at the height of the financial crises. The reason why foreign investors cannot come is because they are destroyed. We need to know where we are to encourage us to correct our mistakes.
The shallow state of the stock market today is either liquidity problem or evaluation problem but I think it is mostly liquidity problem. We must create liquidity. Foreigners are going out.
“We must create liquidity in the market. Government must create a fund that based on certain parameters can invest in stock market so that when there is lack of liquidity, government will come in and when there is excess liquidity, government takes their money out.
“That will crate higher volumes and make valuation more accurate in the market.”
He noted that government must put the right policies in place, noting that the nation’s capital market have potential to attract higher investment and increase its capitalisation.
“We must have the right policies in place. The market can get to N100 trillion. The potentials is high. If we do the right thing, it will impact on the market,” he added.