Capital market operators have attributed the downturn witnessed in the nation’s stock market to the exit of foreign investors that play dominant role at the Nigerian Stock Exchange, following the unstable macroeconomic environment, after massive sell-off of shares.
According to them, another major factor that was responsible for the decline in the market was the delisting of 25 listed firms from the daily official list of the NSE.
Specifically, an economist, Mr. Johnson Chukwu, said equity market had been sluggish because the Pension Fund Administrators were not aggressively investing in the equities’ market.
“The Foreign Portfolio Investors had taken their position in 2017 in the equities market and that was why we saw the 42 per cent appreciation of the market. But in the first quarter of 2018, the FPIs invested $701.61 million in equity, $335.88 million in Bonds, $3.527 billion in money market, while total capital imports stood at $6.303 billion.
“So the equity market was sluggish in Q1’18 as foreign investors began to repatriate their dividend and also put demand pressure on the foreign exchange market in response to declining yield on government securities,” he said.
Chukwu pointed out that while the NSE delisted 25 listed firms, only five new issues were recorded in the last three years.
“The equities market suffered and no issuer wants to come to the market due to low market prices. Among the 25 delisted firms, three delisted on their own, while the NSE compelled the rest.
“This is because they were unable to meet up with the post-listing requirements. The environment was indeed challenging that companies that were relatively strong and listed have become so weak that they could not meet up with the post-listing requirements.”
He, however, cautioned the domestic retail investors to be careful in their investment decision on equities, as the market is likely to record continuous drop, given the challenging macroeconomic environment in the build-up to the general election.
The Chief Research Officer, InvestData Consulting Limited, Mr. Ambrose Omordion, said investors are currently trading with caution because of fear of political risk and the belief that any perceived violence in the country may trigger panic and massive dumping of shares.
He said the development has caused apathy and low investors’ confidence in the market, as foreign investors that play dominant role have resorted to massive selloff of shares in the
market.
“The weak response to earnings’ surprises is evident in low liquidity in the market, especially as at April ending when Nigeria’s 2018 budget was still facing so much uncertainty, leaving the economy to run entirely on monetary stimulus,” he pointed out.
