Equities Market loses N2tn to policy inconsistency, delays

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Policy flip-flops   by the government, dwindling poor corporate results by quoted companies and general downturn in the economy have led to a fall of N2 trillion in the value of the Nigerian equities market within the last one year, THISDAY checks have revealed.

The value of the equities market stood at N11.512 trillion on June 3, 2015 but has dipped to N9.491 trillion as at June 3, 2016 as investors dumped shares on the back of policy  inconsistency on the part of government, dwindling oil revenue and general challenging operating environment.

Although the equities market has suffered decline for the past two years, it was expected that the entry of a new administration would reverse the negative trend.

For instance, the Chief Executive Officer of the NSE, Mr. Oscar Onyema had said that with greater clarity on policy direction, they anticipated the return of investors who had remained on the sidelines throughout 2015.

“This return is predicated upon return of investor confidence as a result of: effective implementation and communication of the government’s economic blueprint; credibility in monetary policy stance; relative stability in the macro economy (oil price stability above benchmark targets, increase in tax collection to gross domestic product among others) and improved   security,” he said.

However, these expectations have not been met, a development that has   weakened investor demand for stocks.   Some financial experts had said developments in the global oil market and foreign exchange policy would determine capital market’s performance in 2016.

According to them, the decline in the nation’s bourse would continue if the price of crude oil continued to fall and government fails to move faster in policy implementation.

The Managing Director, APT Securities and Funds Limited, Garba Kurfi, said oil price was critical to stock market growth in 2016. He also added that the foreign exchange policy would be another determinant factor of the market’s direction.

He said the current monetary policy should be adjusted by the Central Bank of Nigeria (CBN) to the current realities in the economy to achieve the desired growth and development.

Kurfi said that the apex bank should be mindful of Nigeria’s foreign exchange policy to be pursued in 2016 to avoid heating up the economy.

However, the CBN has not remained unclear about its forex policy and when it decided to adopt a flexible forex policy two weeks ago, it has not given details on that pronouncement.

The lack of clarity in the CBN’s forex policy led to a decline in the market last week as the early euphoria that greeted the policy pronouncement paled

 

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