‘Policy Harmonisation Needed to Stabilise Market’

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By Goddy Egene

As the equities market continues to slide, a stockbroker, Mr. Rotimi Fakayejo, has said that harmonisation of policies among regulators in the financial sector was needed as a long-term solution to achieve stability.

After gaining N8 trillion in 2020 and N1.1 trillion in January 2021, the stock market has suffered persistent decline since February. The sudden bearish trend despite impressive dividends declaration by some companies, has been attributed to profit-taking and uptick in yields in money market instruments.

For instance, in December 90-day, 180-day, 360-day Open Market Operations (OMO) bills were at 0.3 per cent, 0.5 per cent and 1.03 per cent respectively. However, these rates have jumped to 7.5 per cent, 8.5 per cent and 10 per cent in that order in February, a development that is attracting investors back to the fixed income market and partly contributing to the bearish equities market.

Speaking on the development, Fakayejo said if there was harmonisation of policies among the regulators, sudden change in market directions and instability would not happen. The stockbroker therefore called for harmonisation of policies.
He explained that foreign portfolio investors, who played a major role in the past by stabilising the market, would not return soon following the instability of the exchange rate.

“There is no portfolio investor who will bring in dollar at the present rate and since they usually play short-term and in the next one year exchange the dollar for about N500. They won’t want to do that. So if you see a situation the exchange is stable, then we can see an influx of foreign investors. But as much that(stable exchange rate) is not in place, we going to see them stay back and even not considering this economy at all for now,” he Fakayejo said.

Speaking on the rise in the yield environment, the Chief Executive Officer (CEO) of Blackstone Capital Limited, Dr. Lizzie Kings-Wali, said: “Whilst the rising inflationary pressure may not shift Central Bank of Nigeria’s (CBN) appetite for a low rate environment, aimed at stimulating credit to the private sector and mobilising capital formation at reasonable cost, the perennial challenge of weakening naira is a major domino variable that often compromise the stance of the CBN and broader Monetary Policy Committee (MPC) in transiting Nigeria to a sustainably low rate environment.”

According to her, the CBN may be stuck between a rock and a hard surface, advising that the naira should be allowed to depreciate naturally and find an equilibrium in a guided liberal market, whilst the CBN pursue a sustainably low interest rate to reduce the cost of capital.

“Notwithstanding the inflationary implications of this position, maintaining a low cost of capital for all economic units – government, businesses, and household, is sine qua non for inclusive and sustainable growth of the Nigerian economy,” Kings-Wali said.