Bailing capital market from suffocating bear hug

Mikali

As stakeholders and market watchers await the much needed policy direction of the new government, analysts told BUKKY OLAJIDE what they want the government to do for the market.

Before the change of government in  2015, stakeholders have expected, among other things, the full implementation of the re-capitalization of Capital Market Operators with new deadline set for Sept 30, 2015 and the implementation of the ten-year capital market master plan (2015 to 2025).

The implementation of the ten-year capital market master plan starting from 2015 is expected to re-shape market structure as the market is expected to witness the introduction of Islamic bond capital market products like Sukuk which is expected to contribute 15 per cent of the projected 25 per cent non-interest capital market contribution.

To move forward with the new government, analysts and stakeholders have drawn urgent attention to the disintegrating economic fundamentals of the nation at the moment.

Specifically, Proshare analysts called on the government and its agencies to put measures in place to savage the situation; build formidable capital that would drive the expected growth and development of Nigeria’s economy to deliver the promised prosperity  for all.

According to them, the socio- political and economic factors needed to chart a new course for the nation should be put place, rather than continually shifting the goal post.

Proshare analysts also expect to see brokerage firms launch zero-fee stock trading Apps which will encourage more local investors to participate and trade in the market at no cost/commission.

The Chief Executive Officer, Nextnomics Advisory, Dr. Temitope Oshikoya, observed that the capital market has been buffeted by a combination of both micro and macro factors.

He explained that capital market specific factors include disappointing corporate earnings, deadline for recapitalization, and regulatory sanctions against a major broker/dealer.

He explained further that macroeconomic headwinds include higher inflation, sharply lowered Gross Domestic Product growth rate, emerging fiscal holes, unpaid contractor debts, weak external reserves, exchange rate depreciation, and reduced foreign portfolio inflows.

‘’These, in the main, have been the economic legacies of the past government’’, he said.

Against these micro and macro headwinds, the capital market, especially the institutional investors appear to be cautiously optimistic about the new government and eagerly await Buhari’s economic policy direction and team.

Therefore, he said, it is expected that Buhari’s administration will enhance governmental effectiveness by reducing the cost of governance, restructuring anti-corruption agencies and key revenue generation agencies including Customs, NNPC, and FIRS to plug fiscal leakages .

However, Osikoya felt that while substantive policy direction and team are awaited, some positive steps are already being taken in terms of austere style and tone from the top on governance.

“For example, it has been reported that Presidential jets are to be reduced by nine planes, pipeline vandalism are to be checked by established security agencies and not by private agents, and NNPC is making a lot of noise about repairing refineries, while power supply appears to be improving.

‘’More importantly, though, the new administration appears to favour a paradigm of “social market economy” with the twin objectives of promoting market efficiency with equitable and shared prosperity across class and regions. What remains to be seen is how the huge cost of about N60 trillion or $300 billion, about more than 60 per cent of GDP, of the combined equity and efficiency programs of the campaign promises will be financed,’’ he said.

National President. Constance Shareholders’ Association of Nigeria, Shehu Mallam Mikail told The Guardian that the expectation of Nigerians from this new government are so high but the government cannot do it alone without the cooperation of the people.

‘’We also need to contribute in other to alleviate the situation on ground,’’ he  said.

Mikail felt that there is nothing wrong with the old capital market.

He said: “ It was just that those saddled with the responsibility are not been transparent and those policies made, then, are one sided. The operators are just operating the way they like without thinking of how to better those policies. They did not care about the rules of corporate governance and the government does not care because of the mafia within the setting. Also, people do not know much about the benefit of the capital markets.”
He stressed the need for the people to obey and abide the rule of law and be a watchdog over issues that would better the life of the populace.  The president urged the government to create enabling environment that would enhance the thinking of the people.  ‘’Government does not need to involve in businesses of the nation, but rather, it needs to provide an enabling environment by making good policies that would secure the confidence of the people and also provide a good security frame work that would put the mind of the people at rest.’’

Bolaji Okusaga called on the government to re-inject some confidence by appointing someone with credibility as the manager of the economy who will bring the bulls back at the Stock Exchange.

According to him, this is because the market has been persistently bearish. ‘’Assure Foreign Portfolio Investors that you are ready to deal with the issue of currency risk and get the local economy working through new policies which will address the energy crisis and infrastructure deficits. Modern governments thrive on confidence building and not cold observation and passive engagement on the real issues as currently been done’’, he said.

The Chairman, Trustfund Pension Plc, Mrs. Ngozi Olejeme, blamed instability in the capital market and non-payment of salaries, for the low performance of Pension Funds Administrators (PFAs).

She listed some of the challenges in the business environment to include the falling oil prices, negative forecast of the outcome of the general elections and the devaluation of the naira.

Olejeme, who spoke during the seventh yearly general meeting of the firm in Abuja, pointed out that last year was stormy for the pension industry.

Olejeme,  said: “If one looks at the fact that Trustfund management declared the same 25Kobo dividend in 2013 and 2014, one may not appreciate how the difficulty in the environment in 2014 was.

“We should not forget that the preparations for the 2015 general elections was at all-time high in 2014, the crash in the price of crude oil in the international market also happened in the same year and non-payment of salaries even at the federal level also took place during that year.

“There was also the devaluation of the naira and we also witnessed the instability of the stock market where we invested about 30 per cent of our money. Overall, we have about 70 per cent of our resources invested in one form of money market or the other.

“Coupled with all of these, were all the negative forecasts about the outcome of the general elections. All of these were formidable factors that impacted negatively on the performances of businesses. So, for us, to be able to march what was declared in 2013 is a great achievement.

“We are also very happy that the shareholders showed massive understanding during the trying period. We are hopeful that with an improving operating environment this year, our shareholders will smile more next year.”

The Nigerian Stock Market in 2014 closed negative with the key market indicator, NSE ASI, far below what was expected at the beginning of the year. Nonetheless, Market regulators, operators and every other stakeholder will expect that 2015 will be a year of new developments and growth in terms of positive market performance and reactions.

One of the key decisions and actions expected to shape market outlook and structure in 2015 is the re-capitalisation exercise earlier announced by the Securities & Exchange Commission (SEC), the apex capital market regulator in Nigeria.

With a nine-month extension reached by the Board of the Securities and Exchange Commission at its end of the year meeting, analysts believed that capital market operators will have ample time to prepare in order to meet the deadline for compliance considering the global economic situation of which Nigeria is not an exception.

The Market which remains one of the most developed in Africa ended half year 2015 in the negative territory as Analysts, Investors and market stakeholders expect an improvement in market situation as expectations continue on the economic and policy thrust of the new administration.

Market benchmark indicator, NSE ASI, recorded 3.46 per cent losses in H1 to close the half year bearish while quarterly review of market performance reveals that the NSE ASI recorded 5.39 per cent gains in second quarter 2015 as against 8.40 per cent loss recorded in first quarter of 2015.

The 8.30 per cent gains recorded at the close of trading on 1st April 2015 which was the first trading day after the announced of the winner of the 2015 presidential elections contributed immensely to the positive closure recorded in second quarter.

A review of the monthly market performance further reveals that the highest monthly gain (9.33 per cent) was recorded in April 2015 while highest loss (14.70 per cent) was recorded in January 2015 in the build-up to the 2015 general elections.