Stakeholders bemoan devastating effects of election year on market
•List strategies to tame volatility, reoccurrence
Capital market stakeholders have raised alarm over the consistent adverse effect of Nigeria’s genearal elections on the stock market, urging government to institute an economic team, comprising professional that would review the nation’s fiscal and monetary policies and chart way forward.
General elections in the country have set a pattern of disrupting economic activities, with unusual concerns that put sectors into speculative mode over new policies or policy changes by government.
These policies changes or inactions, may affect adversely or favorably the functioning of these companies and in turn, impact their prices in the stock market and make investors wary of the market.But the stakeholders argued that while other emerging markets’ exchanges and developed countries recover faster from pre-election anxiety, the Nigerian stock market records astronomical fall in share prices, even post-election.
For instance, between February and May 2018, political intrigues ahead of the 2019 general elections made stock market investors to lose N729 billion in three months of decline, contrary to general expectations of positive earnings in 2018. The stock price fluctuations continued unabated until the February 2019 presidential election.Available statistics also showed that investors’ fortune depreciated by N517 billion in 12 days within the period.
Specifically, investors lost N289 billion after the presidential and National Assembly elections and N228 billion in two days after the governorship and House of Assembly polls. Since the 2019 election, growing security challenges in Nigeria have been posing serious threat to efforts put in place to restore investors’ confidence and attract foreign direct investments into the market.
Few foreign investors that decided to “pitch their tent” with the Nigerian stock market after the exit of their counterparts offloaded their shares massively due to fears of losing values in their portfolio.Till date, increased volatility and illiquidity have continued to trigger persistent downturn in the market, raising more questions regarding the timeframe for the end of the current weak performance.
The President of Pearl Awards Nigeria, Tayo Orekoya, said for the economy and the stock market to record any meaningful recovery, government must put together an economic team that would prescribe leeway to nation’s economic growth.“Our election comes with too much issues surrounding violence, too many uncertainties and unpredictability on what happens after the election. A lot of hews and cries as if the whole country is going to collapse,
Furthermore, the response time to putting things in place post election must be improved upon, response time with regards to the formation of the cabinet, especially in a situation where we are already have three months before the institution of the new government.“Again, the issue of late passage of the budget must be reviewed. We all know that the financial year starts from first of January, normally, you will have expected as in other countries that the budget should have been presented say around August or September of the preceding year so that by November, latest December, the budget is passed and the direction is clear,’ he said.
He continued: “We have economists, people that are authorities in capital and money market, economists, we need to bring them together to say lets chart a course for our economy.“The CBN is going in the right direction by constraining the banks to ensure that they fund the real sector and SMEs, these are positive measures, rather than placing fund in treasury bills.
“There is need for increased investors education so that people will know that the market is a long term market. We need to educate the people. Since the stock market burst of 2008-2009, the market has not recovered and investors’ confidence is still at low ebb.”The President of Constance Shareholders Association, Mallam Shehu Mekail, said there is need to also grow local investment rather than relying so much on the foreign investment in the capital market.
“What percentage of Nigerians invests in the capital market? SEC has a lot to do about investors’ education. Government must initiate policies to encourage investment in the capital market. “Again, the 10 year master plan needs to be reviewed to look at current dynamics to see how we can make our market more resilience to respond to shocks. These are issues we need to look at.”
An independent investor, Amaechi Egbo, said the market needs fresh injection of capital, both from the foreign and more importantly, from the local investors. “We have placed so much emphasis on foreign investment in our capital market, which is right but the point is that the capital market is easily shocked by reaction of the foreign investors.“When they draw from the market, naturally the market becomes bearish but if we can make our people have confidence in our market, we can be able to find a solution to all these and the market becomes resilience.”