Trading session at NSE
By Goddy Egene
The losses incurred by first time investors at the stock market, perceived weak regulation on the part of the Securities and Exchange Commission (SEC) and unfavourable policies by the Central Bank of Nigeria (CBN) are some of the reasons many investors are yet to return to the Nigerian capital market THISDAY investigations have revealed.
The stock market is yet to recover from the downturn it suffered since 2008 as investors’ patronage remained weak despite low valuation of most of the equities. At present, foreign investors dominate secondary market activities on the floors of the Nigerian Stock Exchange (NSE), while the primary equities market activities have dried up.
However, THISDAY checks revealed that many local investors who bought the shares of firms listed between 2008 and 2009 and recorded losses in their investment shunning the market due to the losses.
For instance, investors in some of the companies have suffered losses ranging from 96 per cent to 47 per cent. Starcomms Plc is leading the pack with a loss of N96.5 per cent. The shares of the company were listed at N14.33 in 2008 but is currently trading at 50 kobo which is the nominal value.
Daar Communications Plc has suffered loss of 90.5 per cent, having slumped from its listing price of N5.25 in 2008 to 50 kobo currently.
Omatek Ventures Plc has also dipped by 90 per cent while MTI Plc, Union Diagnostics Plc and FTN Cocoa Processing Plc have depreciated by 87 per cent, 83 per cent and 82 per cent respectively.
Investors who put their funds in insurance stocks are all counting their losses in most of the stocks. The capital depreciation suffered in the insurance subsector range between 80 and 50 per cent.
“No investor who has suffered losses of this magnitude would want to return to the market except there is the assurance of the safety of their investments going forward. But unfortunately, regulators in the capital market are not doing enough to assure investors and encourage them back to the market,” Mr. Oderinde Taiwo of Proactive Shareholders Association of Nigeria, said.
According to him, efforts by shareholders to woo local investors back to the market have failed because of the fear of more losses and absence of regulators at enlightenment programmes organised by shareholders’ association to assure investors.
“The regulators are not doing enough to regain the confidence of investors. And when shareholders’ associations organise fora to convince investors to take advantage of the low prices of shares, officials of SEC and Nigerian Stock Exchange (NSE) are not always there to calm the agitated investors,” Taiwo said.
In the views of Mr. Boniface Okezie of Progressive Shareholders Association of Nigeria, the government and its agencies are the ones discouraging investors from returning to the market, saying the agencies have not done enough to guarantee safety of investments in the market.
“Until the government assures investors of the safety of their investments, saying there will not be nationalisation of their investments again, investors would not return. Investors need an assurance that the already nationalised banks would be returned to their original owners. Until that is done, the market will not witness the return of investors,” he said.
Apart from the perceived weak regulation on the part of SEC, some analysts said the liquidity tightening policies of the CBN, which have driven fixed income rates to record highs, was another factor discouraging investors from the stock market.
Mr. Michael Oyebola of FBN Capital Limited, had told THISDAY that no investor would patronise any asset that carry higher risk must generate a return that is above 16 per cent that less riskier government assets are generating currently.
“Currently the risk free rate for a one year instrument ranges between 15 per cent and 16 per cent. For investors to patronise any riskier asset, then it has to generate returns in excess of 15 per cent or 16 per cent,” he said.