Atika Balal and Kayode Ekundayo
26 October 2008
Lagos — Though key players in the sector have tried to douse the tension raised by the decline in the stock market since it took a sliding due to the global economic downturn, the Nigerian capital market has taken a turn for the worst.
Rep Ahmed Aliyu Wadada, chairman House Committee on Capital Market believes that the challenge of enforcement and compliance is the most daunting. While the managing director of Kapital Kare Trust and Securities Limited predicts that the situation will take a turn for the better.
But the assumptions becloud the fact that an estimated sum of N3 trillion has been lost in the last six months when market capitalisation declined by 23.5 percent. From available records, the market suffered losses from N12.1 trillion at the beginning of the slide in March 2008 to N9.26 trillion by the first week of October 2008.
Thousands of Nigerians had planned to improve their status, marry, construct houses and educate their children among other dreams, but these appear to have been dashed.
These losses suffered by Nigerians at the stick exchange have led to a flurry of measures aimed at stabilising the market whose present state has led to a lamentation by Nigerian investors. From Lagos to Maiduguri; Port Harcourt to Kebbi, Nigerians are expressing great fears over what would become of their investments.
These losses and growing loss of confidence in the stock market has led to a decline in business for stockbrokers. When Sunday Trust visited one of the stock brooking firms located at the Central Business District in Abuja, a disturbing silence enveloped the office. The beehive activity that was seen during the reporter's visit last year was totally absent. The firm was devoid of the usual hustle and bustle of business activities and long queues of investors seeking information on shares.
After staying ten minutes at the reception with no one to talk to, a lady walked to the reception desk and asked if she could be of assistance. When the reporter said he had come to have a chat with her boss, she said: "He is out of town and is presently in a seminar in Ilorin and won't be back till next week," she said. Throughout the 30-minutes stay, not a single investor walked in to inquire on state of stocks. A visit to another stockbroker's office revealed the same picture. Only the chattering of cheerless voices whose faces bemoaned the anguish of the times. Last week, the Nigeria Stock Exchange declared that over N3 trillion had been lost in the last seven months since the down turn on the shares prices commenced.
As investors continue to lament the threatening unpredictability of the stock market, the Central Bank of Nigeria (CBN) is not forthcoming with measures to bail out the market from the crisis it finds itself. Though operators of the market are confident that regulators of the market would soon come up with measures, many Nigerians spoken to expressed disappointments over the declining shares prices.
For some time now, the instability in the stock market has generated so much tension for those who own shares in the Nigerian stock market. While most of them worry that this instability would make them run at a loss in the end, others insist that the rise and fall is nothing to worry about as it is a phase in the stock market which cannot be avoided and would come to pass in a short while.
Adakole Ijogi, a property developer, owns shares in Access Bank and doesn't feel the instability is an issue to be troubled over.
"I bought shares in a public offer sometime last year, for some time it was doing well and now that it is depreciating, I am not in the least way worried or disappointed because I didn't expect an immediate progress. Those who know the stock market well would tell you that it is a long term goal so one shouldn't panic when it depreciates. The Nigerian stock market is still growing and in the next five years I see it stabilising."
He said the major problem the stock market is faced with is the entry and exit of funds.
"Most people buy shares during public offers and once they obtain their certificates, they dump it in the market. People need to understand that it doesn't work that way."
While Ijogi says the instability of the stock market does not disappoint him, Habiba Yusuf says otherwise.
She bought N130,000 worth of shares from IBTC at the rate of N11 per unit in June 2007; just like every other person she says she needed to invest her money wisely. Unlike Ijogi however, she is worried that this flux could make her lose so much at the end.
"I am very unhappy with the situation of things in the stock market particularly IBTC because I have shares there. I bought shares because I needed a place I could invest my money hoping that in the end it would yield good returns but as at October the value was less than 120,000. I have not been able to redeem my money due to the fall in price."
Unlike Habiba, Salisu Umar shares the same view. He bought shares in a public offer from First Bank in 2007 at the rate of N33 per unit and he says that fluctuation is a normal trend in the stock market.
"I am not worried about the fluctuation in the stock market because it is a normal trend. Such instability only worries those who bought shares for short term purposes; I on the other hand did because I want a long term investment. It is a good long term investment if you are not a secondary market player. I have always known that First Bank would have this problem because sometime 2006 they gave their share holders a one to one bonus and a one to four in 2007; a lot of people rushed to the market to make money and as a result the prices crashed. That's not to say I do not believe in the Bank. I bought the shares because I know it is a very strong bank that has been on the stock market for over 100 years; they have money asset base, share capital and good business men. It isn't possible that at the end of the day share holders would run at a loss."
He said that people have no idea how the stock market works so they need to be educated.
"Nigerians are copy cats. They always want to do what they see people doing without knowing if it would work for them. If you are a person who wants immediate profit, then you should go for the primary investment, however if you want a long term investment then you should go for the secondary."
Prince Bulus Audu agrees with Salisu. He owns shares in Skye Bank, Bank PHB, Bagco, UBA and Union Bank. Some of them he bought 3 years ago and others last year. He says the instability does not worry him.
"A few years ago I bought UBA shares at the rate of N3.80k and last year I bought Bank PHB shares at N15.50k. Right now my UBA shares are worth millions of Naira so there is no way I can say I am disappointed. I feel that people are worrying unnecessarily because it is a global crisis. It isn't just limited to Nigeria or the African economy and it is a stage in the stock market that cannot be avoided. Right now, maybe there is a huge flux but in the long run it would appreciate. I bought these shares because I have faith in the Nigerian stock market and the situation of things now wouldn't make me lose the faith I have. Eventually it would be stable."
Even though Audu, Umar and Ijogi maintain this instability, it is only a temporary crisis that shouldn't generate worry in any way, Ahmed Talib disagrees. He, like Audu, owns shares in UBA and he says the instability in the stock market is definitely something to worry about.
In Talib's words, "I ask myself why I bought shares, the answer is simple. I did so to invest my money and in the long run make much more. But with the rise and fall here and there how can I not be disappointed? No one would want to invest in a business that isn't stable and now we are talking about shares. However little you bought, you still hope it would eventually manifest into something great. I must tell you that I really don't see that happening with this instability. It makes me unhappy to think that my investment would go down the drain."
The continuous plummeting of the capital market in the country is translating into wanton fear and uncertainty in the minds of many investors in that financial sector. Malam Bukar Gadanga, an Abuja based businessman and long time investor in the stock market related his experiences to Sunday Trust. His investments are spread across the manufacturing, insurance, banking, among other blue chips companies.
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