Stock market volatility: Operators seek FG intervention fund

By Peter Egwuatu


Operators in the Nigerian capital market have moved for Federal Government intervention fund to save the market from the current volatility and grow the economy.

Unlike the Stock market, Forex trading is Online

The coalition of the Chartered Institute of Stockbrokers, CIS, Association of Issuing Houses of Nigeria, ASHON and Association of Issuing Houses of Nigeria, AIHN at a press conference in Lagos kicked against the reintroduction of stamp duty by the Federal Government, saying “it will add to the cost of transaction in the market.”
Speaking, Acting President, CIS, Mr. Oluwaseyi Abe said “ The capital market is going through challenges that are not uncommon with other markets especially the automated markets which operate in a crest and trough pattern in response to variables in the macro economy and within the market itself.”
Pulse of the economy
According to him “This is so because the capital market is an integral part of the economy which ideally serves as a barometer for measuring the pulse of the economy. Moreover, we operate in a globalised economy where geographical barriers have been broken down by the internet, so global trends tend to create a domino effect in various economies and markets. Until 2008, the Nigerian capital market had remained relatively stable.
He stressed that the original problem of the market can be traced to lacuna created by the Central Bank of Nigeria, CBN by failing to regulate banks’ involvement in margin loans for speculative trading and the apex bank’s mismanagement of the information to stop margin loan which created panic in the market and coincided with the 2008 global financial meltdown.
In his own contribution, Chairman, ASHON, Mr. Emeka Madubuike said “It must be noted that margin loan is not a bad thing per se. It is a normal stock market practice but it has to be regulated, otherwise it has the potential to destabilize stock markets when things go awry, especially small and developing markets.”
According to him “Since 2008 there have been a lot of transformational changes that were structured by the regulatory authorities to place the market on a stronger keel as a result of which the market took a turn. But, because stock markets are cyclical in nature and respond to emerging trends, there are bound to be crest and trough periods as presently exists.
“Presently, the South ward direction of the market is determined by three major factors, namely, adverse macro-economic situation largely due to a drastic drop in the price of oil; negative public sentiment which is related to the state of the macro-economy, and retreat of foreign portfolio investors which is related to CBN policy on foreign exchange.
He explained that the market has deprecated by about 21.25% since the beginning of the year, 2016 due to sell pressure and investor apathy which are related to the factors enumerated above.
While, proffering solution, Madubuike said “In recognition of the importance of the capital market, government should make a pronouncement on the state of the market as comfort to the investing public.”
He explained that market operators are working closely to seek audience with the government for further interaction on the state of the market. “As a short term measure for the immediate the CBN should create an intervention window for about N200billion to be accessed by market makers to shore up the market.
Each market maker should be availed of N1billion to N10billion; SEC should also consider structuring accrued dividend to shore up the market; the government should support the market by buying and warehousing shares as it is done in advanced markets; there should be a policy for banks to operate zero interest rate to stimulate activities in the capital market” he stated.