Stakeholders bemoan CBN forex policy

investors lose N873 billion in four months
Capital market stakeholders in the country have bemoaned the negative effect of the Central Bank of Nigeria (CBN)’s foreign exchange policy on the market, urging the government to, not only take decisive steps to bridge the gap between the official exchange rate and that prevailing in the parallel market, but also make the rate more stable.

The stakeholders, who are not happy by the 9.8 per cent loss suffered by stock market investors since the last four months owing to the persistent fall in equities prices, noted that there was need for government to unify the double exchange rates existing in the country so as to woo foreign investors back to the market.

From available statistics, the market capitalisation of quoted equities, which was N9.575 trillion as at January 4, 2016, has dipped to N8.884 trillion as at Monday, May 9, 2016. This translated to N873 billion or 9.8 per cent loss in four months. The All-share index also slumped by 2,542 basic points or 8.9 per cent from 28,370.32 to 25,828.30 during the same period.

The Group Managing Director, GTI Capital, Abubakar Lawal, in an interview with The Guardian, expressed concern about the effect of the foreign exchange policy on the market.

He pointed out that foreign investors do not normally feel confortable with dual exchange rates regime, noting that the free fall witnessed in equities’ prices in the market in recent time could be traced to the exit of foreign investors.

“The way to go is to unify the exchange rates. When you have a uniform rate, it would foster confidence and one can look at Nigeria from any part of the world and say: ‘With my dollar this is the rate it can take me’,” he said.

The Former President, Chartered Institute of Stock Brokers, Ariyo Orishekun, explained that economic growth and development could only be realised by a combination of local and foreign investments through a well-functioning capital market.

According to him, the consequences of misalignments of exchange rates can lead to output contraction and extensive economic hardship, adding that, there is strong evidence to support the argument that the alignment of exchange rates has a critical influence on the rate of growth of per capital output in low-income countries.