Stockbrokers Urge FG to Ensure Policy Consistency

Oyinyechukwu Ezeagu

Goddy Egene
The Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Oyinyechukwu Ezeagu, has called on the federal government to sustain policies that impact financial markets and entire economy positively.

One of such policies, according to him, was the decision of the Central Bank of Nigeria (CBN) to exclude individuals and local non-bank institution from its open market operations (OMO) auction last year.

The policy has since crashed yields on the fixed income securities and increased patronage of the equities market.
Ezeagu explained that the OMO policy had been very beneficial to the stock market, noting that the fall in interest rate created opportunities for higher return on equity (ROE) and investors are taking advantage of the inverse relationship between the money market and capital market.

He, however, expressed concerns about the sustainability of the OMO policy going by uncertainties that usually characterise government policies in Nigeria.
According to him, the government might decide to reverse OMO policy if banks mount pressure that it was hurting their profit margin or the CBN perceives a need to boost the nation’s external reserve.

“Our concern is always policy uncertainty and consistency in Nigeria. This has been a major drag to the growth and development of the economy and by implication, the capital market. “The new policy on OMO is making investment in the market more attractive but the question is sustainability. We operate in an unpredictable environment where there can be policy somersault at the least expected time,” Ezeagu said.

The OMO restriction was part of the CBN’s financial engineering tactics to ensure that deposit money banks channel credit to the real sector and reduce the crowding-out effect on the private sector in terms of credit.

“Banks should lend money to the real sector to enhance economic growth and development. Banks are currently awash with liquidity and this should be channeled to the real sector,” Ezeagu said.

Some market watchers had expressed fears that the naira might be devalued.
But the CBN Governor, Mr. Godwin Emefiele, had last year allayed such fears.
Last week, the apex bank’s Monetary Policy Committee (MPC) increased Cash Reserve Ratio (CRR) by 500 basis points, from 22.5 per cent to 27.5 percent, apparently to hedge against upsurge in inflation rate which is at 11.98 per cent as at December last year.
The upward movement of CRR was to mop up excess liquidity in the system. However, Monetary Policy Rate (MPR) was retained at 13.5 percent, Liquidity Rate, 30 percent and Asymmetric Window at +200 and -500 basis points.