Experts have blamed the unabated fall in the prices of equities in Nigeria on the instability in the value of the naira.
Meanwhile, a global investment adviser has excluded Nigeria from the list of countries that foreign investors should consider for investment in 2016.
Though the Nigerian equities market was bearish for the greater part of last year, the rate at which the prices of shares have been falling since the beginning of the new year is worrisome. The experts are laying the blame squarely on the sliding value of the naira against the dollar. For example, the capitalisation of all the equities in the market, which stood at N9.66 trillion as at January 5, the date the Nigerian Stock Exchange started operations in 2016, had slumped, within 13 days, to N7.76 trillion, translating to a loss of N1.9 trillion (that amounts to a loss of approximately N15 billion per day).
A notable international investment advisory agency – The Credit Suisse – in its earlier Investment Solutions & Products (IS&P) team’s report, published in late December, on opportunities to invest in select emerging markets in 2016, had excluded Nigeria and other African countries but points to stock markets that are in Asian countries where inflation is low, currencies are stable and countries import more commodities than they export – specifically China, India, South Korea, and Taiwan.
Those who spoke to The Guardian on how the sliding naira value is causing the panic sell-off of shares, explained that the exchange rate determines foreign portfolio investment in equities.
According to one of them, Godwin Ashikordi, managing director and chief executive officer, Admark Global Resources Limited, the equities markets, all over the world, thrive more on foreign investors’ patronage and the market serves as the barometer of the economy.
He declared: “Foreign investors look at the stocks market first before making up their mind on whether or not to channel their funds to the country for portfolio or Direct Foreign Investment (DFI).
“When you talk about foreign investors, whether direct or portfolio, the investors being referred to are expert money managers. These people are in charge of large investment funds belonging to foreign-based organisations or institutions. The money managers are engaged or employed to manage the huge funds on behalf of the owners of the money.
“These managers earn their living through the shrewd and perspicacious management of the funds entrusted to them to do business in global investment outlets.
“To achieve their mandate, they’ll launch out like prying eagles, carefully scanning for viable and lucrative investment opportunities all over the world, especially in emerging markets. They gather vital investment information and awareness on government policy statements, economic blueprints outlined by various countries, interest rate, inflation and exchange rate that are prevailing everywhere in the world.
“In Nigeria, such foreign fund managers channel their investment funds through our local stockbrokers to invest in the equities of quoted companies, not directly in the companies as by way of buying trucks, machinery or generators for the companies to use to boost their operations.
