Experts bemoan effects of political instability on stock market
Specifically, they argued that the Nigerian capital market should have wriggled out of the global recession like other countries of the world, but regretted that retail investors are still counting losses 10 years after due to political unrests, which continue to hamper progress and development.
Indeed, the experts noted that the growing security challenges in Nigeria, is posing serious threats to efforts put in place to restore investors’ confidence, and attract foreign direct investments into the market.
According to them, the few foreign investors that ‘pitch their tent in the Nigerian stock market’ after the exit of their counterparts are currently offloading their shares massively due to fear of losing their portfolio.
They maintained that the spate of insecurity in the country is having a multiplier effect on the stock market, adding that it is a major factor to the unprecedented lull being witnessed in the market currently.
The Nigerian equity sector gathered momentum in 2017 with N4.5trillion in market capitalisation, from an opening of N9.158 trillion on January 3, to N13.519trillion on December 28. The All-Share Index (NSE ASI) rose by 43 per cent from 26, 616.89 to 37,990.
The rally extended to 2018, until mid-February, when the market recorded unprecedented reversal in performance contrary to analysts’ predictions.
The capitalisation, which stood at N15.549 trillion on February 28, stood at N11.337 trillion December 28, representing a N4.2 trillion or 37 per cent loss.
Also, the NSE ASI fell 12,292 points or 39 per cent to 31,037.72 from 43,330.54, achieved on February 28.
Stakeholders linked the market downturn to tension that plagued the political space in 2018. They said killings by the Fulani herdsmen and cases of thuggery aggravated apathy in investment, especially by foreign investors.
The Managing Director, Highcap Securities Limited, Imafidon Adonri, insisted that because peace and progress are intertwined, investment climate will not be conducive where insecurity persists.
“Investment has tendency to always migrate to secure environments where peace is assured. Liberalisation has made free flow of investment capital across national borders possible with ease, but if the government fails to decisively confront violent extremism in Nigeria, efforts at attracting foreign investment may prove abortive.
“Violence kills people and destroys assets. Therefore, no sane investor will risk his hard earned savings in a strife-torn economic environment. This is behind the recent exodus of foreign portfolio investments from our capital market in the wake of deteriorating security situation in Nigeria.
“Frightened domestic investors can move their investments to conducive foreign markets, thus compounding the woes of the capital market. Also, such capital flight can exacerbate the pressure on the domestic currency,” he added.
The President, Constance Shareholders Association, Shehu Mallam Makail, said insecurity situation in Nigeria is having negative effects on the stock market.
“The insecurity situation is affecting both quoted companies and the stock market. My stockbroker told me that foreign mandate were coming, but foreign investors are selling off their portfolio in anticipation that the current situation will go unchecked.”
An independent shareholder, Amaechi Egbo, said no investor, whether local or foreign would stake his fund in an economy where business activities are not stable
“If business is shut down, it would cripple the whole economy, and everybody would lose. Strikes are not the answer; rather, parties involved should sit down and talk. Government should try and alleviate the pains of the people, because the whole situation is not good for the market and the economy.”
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