Kayode Ekundayo
3 October 2008
Hours after the United States Senate approved a $700 billion emergency bailout plan for the crisis-ridden American financial system, some stockbrokers in Lagos said the American financial meltdown portends grave danger for Nigeria's ailing stock market.
Even before the onset of the American crisis, stock prices here have been falling on the trading floor of the Nigeria Stock Exchange (NSE) for many months and continued to fall despite various measures announced by the federal government, Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) to resuscitate the market.
A monthly report from NSE yesterday showed that the market turnover transactions on the stock market dropped significantly in September 2008.
However, the stockbrokers' gloomy assessment was not shared by the nation's top bankers. President and Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN) Dr. Erastus Akingbola said yesterday that Nigerian banks have not been affected by the crisis in American finance, which has spiraled into European and Asian financial systems.
Yesterday's NSE report showed that transaction volume was at its lowest level in 20-months. A turnover of 10.65 billion shares worth N134.4 billion in 197,213 deals was recorded this month, in contrast to 17.4 billion shares valued at N169.64 billion exchanged during August 2008 in 249,937 deals.
Stockbrokers who spoke to Daily Trust on the development said part of the problem with the Nigeria stock market was caused by the crisis in the US market. According to Dele Odusanya of Quantum Securities, since Nigeria is not isolated from the world economy, the US stock market crisis would rub on the nation's market. He said currently, between 30 to 40 per cent of the investments in the market are owned by foreign investors, adding that what caused the decline in the Nigerian market was as a result of foreign investors trying to take their money back to their own countries, especially to the US.
Odusanya said the American meltdown would further compound the problem of the Nigerian market even though the federal government has continued to assure that all the fundamentals of the economy are still strong.
Also, Frank Ogiamien of Partnership Investment said the Nigerian stock market has continued to witness falling share prices because some of the measures highlighted by the federal government to curb the crisis have not been implemented by the concerned bodies. He said the introduction of share-buy-back and the use of market makers would have helped the market greatly but they have not been implemented.
Ogiamien said Nigeria has been sharing from the US stock crisis as many foreign investors are now looking for liquidity to support their government's efforts.
However, in a statement he issued last night, Akingbola, who is also the managing director of Intercontinental Bank, said."As the crises appears escalating in the world's leading financial markets, it is natural for financial services consumers and the general public in other parts of the world to be concerned about the possible spill-over effect or impacts in the local markets. In the face of several questions being asked, The Chartered Institute of Bankers of Nigeria (CIBN), has therefore deemed it necessary to explain the situation with our financial market here in Nigeria.
The local banks in Nigeria are presently unaffected by the negative developments in the financial markets of the United States and Europe. The reason is that the crises are driven by failed financial products that led to the systemic distress. Nigerian banks are not yet into the kind of exotic products that led to the problems of those institutions abroad.
However, the industry operators are on the alert to avoid the type of investments and consumer lending that would put the system on tailspin. Moreover, the industry is also taking the development in the world financial markets as a wake-up call for refocusing the international expansion because if such crises occurs in five years time many Nigerian banks may be affected just like other global players, as they would have been fully integrated into the global markets.
It is also a wake up call for a home-grown strategy and attention to risk management principles as business network and volumes grows.
Again the financial crises is a wake up call on banks' top executive management, especially the Chief Executives, to have eyes for details and be fully in-charge of the key levers of the business. There is no room for absentee CEOs, but one who is in constant touch with the realities on ground in the running of their organizations."
A version of the bill that the US Senate passed in a 74-25 vote late Wednesday added $100 billion in tax breaks for businesses and the middle class. It also raised the limit on federal deposit insurance to $250,000 from $100,000.
Meanwhile, trading activities on the floor of the NSE opened yesterday after three days recess on a bearish level with market capitalization shedding N54 billion to close at N9.782 trillion. This was against last Friday's trading of N9.836 trillion.
Between Monday and Friday last week the market lost N157 billion while the turnover of shares traded also dropped to two billion shares worth N13.63 billion in 37,416 deals. This was against the previous week's trading of 3.1 billion shares valued at N39.3 billion exchanged in 49.497 deals.
Yesterday, the all share index dropped by 256.23 points to close at 45,959.90 points. In all, a total 441.088 million shares worth N1.631 billion in 5,888 deals were recorded on Thursday.
Insurance sub sector recorded the most tradable shares with Investment and Allied Assurance recorded 236.920 million shares valued at N175.320 million in 84 deals. This was followed by activities in the banking sub sector with 110.833 million worth N954.276 million in 2,963 deals.
Shares of Spring Bank and Fidelity Bank drove the sector. Over 69.388 million and 16.557 million shares of Spring bank and Fidelity bank valued at N387.881 million and N120.477 million in 169 and 206 deals respectively. Only seven gainers were recorded on Thursday with 59 losers
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