Experts seek incentives to boost retail investors’ stake in stock market
Experts in the nation’s capital market have called for more incentives, to attract retail investors as well as form local capacity that can absorb the effects of the exit of foreign portfolio investors.
The stakeholders, who linked the persistent lull in the market to exit of foreign investors, which ultimately created more instability, noted that local investors were the most affected by the recent recession, and had been relegated to the background for years.
They argued that depending on foreign investors especially the portfolio investors to deepen the local bourse is a very wrong approach to growing an institution often described as a “barometer used in measuring an economy.”
They urged government and other stakeholders to step up investors’ enlightenment campaign, and focus more on how to educate Nigerians on the benefits of investing in the capital market.
According to them, while the large presence of foreign investors in the market signifies strong attraction to the country, their sudden withdrawal also portends great danger with a bearish mode, as witnessed presently in the market.
Indeed, after the January and mid-February rally, the market recorded unprecedented reversal in fortunes contrary to analysts’ predictions.
The market capitalisation, which was N15.549 trillion on Wednesday, February 28, stood at N11.268 trillion as at Friday, December 7, representing a N4.281 trillion loss, while the All-share index depreciated by 12,463 points or 40.4 per cent from 43,330.54 achieved on February 28, to 30,866.82.
Analysts blamed the market downturn on political tension caused by the forthcoming general elections, with foreign investors that play dominant role resorting to massive selloff of shares in the market, and urged other local investors to see this as potential opportunity to take position for future capital appreciation.
The Chief Research Officer, Investdata Consulting, Ambrose Omodion, said if government can empower the retail investors by providing some form of incentives; it would help restore their confidence in the market.
“Some portfolio investors are coming to take advantage of the market and the moment they exit, the market moves to square one. We have to get the underlining market strengthened, and make the real sector productive.”
He noted that foreign investors were concerned about the adverse effect of Nigeria’s macro-economic challenges, especially the stability of the monetary and exchange system on investment, adding that the foreign-induced sell pressure presents opportunities for local investors to build up their portfolios at good prices.
The President, Independent Shareholders Association of Nigeria, Sir Sunny Nwosu, said:”Despite the economic meltdown that hit the local investors, they are not being encouraged to increase their participation in the market; instead, they depend on foreign investors, whom, when problems arise simply offload their portfolio, which is why the market continues to slide.
“Foreign investors are favoured more than Nigerians, and they are not doing enough to educate local investors. A lot of Nigerians have burnt their fingers; so they should mount campaigns to educate people that the capital market is not a capitalist one, but a platform for long-term investment.”
The President, Association of Stockbroking Houses of Nigeria (ASHON), Patrick Ezeagu, said the Nigerian capital market can attract local investors by ensuring that there are proper incentives such as good and operational corporate governance practices, favourable policy and social economic environment, appropriate and fair tax system as well as stable monetary and fiscal policies.