Stockbrokers laud CBN over single exchange rate policy

Woos investors to stock market

The Chartered Institute of Stockbrokers (CIS) has commended the Central Bank of Nigeria (CBN) for the re-introduction of the floating single foreign exchange policy, describing it as a bold and positive initiative which attest to the dynamism of the apex bank in policy evolution.

According to a statement by the institute, the operating dynamics of the new framework as stipulated by CBN is in accordance with the tenets of democratic capitalism of which the highlights are, market-driven systems, free participation within individual limitations and the ‘’invisible hand’’.

It explained that the introduction of a forward market to hedge volatility in the foreign exchange market,  and the licensing of foreign exchange primary dealers are well commended innovations that would deepen the market.

“Barring systemic malfunction, CIS believes that the implementation of the new framework would boost dollar supply; and with clarity, define the exact exchange rate, ease the challenges of businesses across the board  and return the economy to the path of growth.

“The currency peg of the past 16 months resulted in a dearth of dollar currency and prompted large scale capital flight with the attendant growth challenges in the economy.

“Foreign inflows into the capital market dropped by 32 percent in 2015, as reported by the Nigerian Stock Exchange, while  the benchmark equity index fell by 17 per cent this year.

CIS noted that the new foreign exchange policy will bolster investor confidence,  trigger  inflow of  foreign portfolio investments and boost the velocity of the stock market.

It also supports  the continual restriction of the 41 excluded items from the interbank foreign exchange market, adding that the exclusion of the items supports the infant industry argument.

“CIS believes that an admixture strategy of the floating foreign exchange policy, an intensive export promotion drive, support for the infant industry argument and pump priming will give fillip to the economy.

Going forward, we are optimistic on the growth prospects of the economy in 2017,” it added.
The institute, had , at the weekend, re-assured investors that the NSE has potential to generate strong Return On Investment (ROI), urging them to leverage the current low prices of shares to increase their portfolios.

The President, Chartered Institute of Stockbrokers and Chairman of the Council, Oluwaseyi Abe who explained that many of the stocks are trading below their intrinsic values, noted that ‘the coast was already clear’ for investors to shore-up their holdings with the current rebound witnessed in the market.

“ It is only normal for the market to swing upward and downward because that is what makes a market. It is absolutely normal. In any case, the direction of the market at any given time is the reflection of the economy and it’s been known that the economy has not been doing well lately. So I feel it is even the best time to invest in the capital market because the economy is now on the steady path of rebound,” Abe said.

Corroborating his view, the Institute’s First Vice President,  Dapo Adekoje assured investors that uncertainty, which characterised the investment climate, would fizzle out in a near future.

According to him, the Federal Government’s policy on the economic direction is becoming clearer, adding that the international community has respect for the President who has been waging war against corruption in Nigeria.