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Investors seek stable business environment to forestall investment outflows

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…Bemoan low patronage as foreigners pull out N100bn from stock market in four months
…Blame insecurity, others

With about N100 billion pulled out from the Nigerian Exchange Limited (NGX) by foreign investors in the first four months, investors have urged the Federal Government to adopt an economic policy that would urgently respond to the macro economic challenges currently rocking the domestic economy, especially the issue of insecurity.

Investors, who bemoaned the low patronage in stock market despite its current cheap prices, blamed the development on the dearth of liquidity and low confidence that have shrouded the market in the past few years.

According to them, foreign portfolio drivers have continued to exit the nation’s bourse due to the poor state of the capital market, exacerbated by the current security challenges while the fewer investors that are risk-averse, patronise money market instruments.

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Indeed, the stock market had witnessed a prolonged lull due to lingering weak macroeconomic situations.

Also, worsening insecurity in the country has continued to take a toll on the Nigerian Exchange Limited (NGX), causing investors to lose N796 billion in May.

Latest domestic and foreign portfolio report by the NGX showed that a total of N99.94 billion was pulled out by foreign investors from the Nigerian stock market in the first four months of this year as foreign involvement plunged to a four-year low in April while N78.31bn was injected into the market from January to April this year.

According to the bourse, foreign outflow fell to N9.82 billion in April from N20.28 billion in March. Foreign investors withdrew N39.05 billion in February, up from N30.79 billion in January.

Also, total transactions in the nation’s stock market decreased by 30.01 per cent from N228.49 billion (about $560.55m) in March 2021 to N159.93 billion (about $389.84m) in April 2021.

The stakeholders insisted that addressing Nigeria’s security challenges and economic instability would guarantee safety of investment and give a lot of confidence to domestic and foreign investors to participate in the stock market

The General Secretary of Independence Shareholders Association, Adebayo Adeleke said wrong signals on emasculating freedom of expression by the Federal Government, coupled with the continuous devaluation of naira despite rising oil price is becoming worrisome to investors.

Adeleke also lamented the heightening tension in the nation’s political space, stating that the increasing level of insecurity, kidnapping and recurrent farmers-herders clashes have called for an urgent measure to stem investment outflows.

He said: “The wrong signals on emasculating freedom of expression by the federal government is worrisome to investors. The continuous devaluation of naira despite rising oil prices, is also worrisome to investors. The political tension is also worrisome.”

He pointed out that the current precarious situation of the country has caused some investors to develop caution on their choice of investment while others have switched to money market instruments where safety of their investments is guaranteed to a certain level.

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The President of New Dimension Shareholders Association, Patrick Ajudua expressed optimism that the market would witness improved liquidity when the half-year results of listed firms are announced.
However, he urged the federal government to promote issues of national development and spend more on capital projects to accelerate economic growth.

The President of Issuers and Investors Adri Initiative (IIADRI), Moses Igbrude argued that business could only thrive in a stable and conducive environment where there is no perceived danger.

He pointed out that the operating environment must be stable and conducive for businesses to thrive and for quoted companies to perform optimally.

According to him no foreign investor will risk its investment in an environment where safety is not guaranteed except few local investors who believe in the market.

He urged the government to restrategise and support the stock market by addressing the current macro-economic concerns impeding the nation’s growth.

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