Faced with economic recession in their own countries, foreign investors in the Nigerian capital market withdrew some $4 billion [about N556 billion] from the Nigeria Stock Exchange and precipitated its steep decline, the exchange's Director General Professor Ndidi Okereke-Onyiuke told a Senate committee yesterday.

Appearing before the joint Senate Committees on Finance, Capital Market, Banking, Insurance and other financial institutions investigating the economic crisis facing the country, Mrs Okereke-Onyiuke said, "In 2008, foreign hedge fund managers went out and withdrew their investment of N556 billion due to the financial crisis in their countries."

Okereke, who was responding to questions posed to her by Senators as to the reasons why share prices in the stock market kept crashing despite assurances by financial managers that the fundamentals of the nation's economy are strong, said hedge fund managers were shocked by the global financial crisis and quickly withdrew their investments from Nigeria and took it back to their countries.

She said, "In 2007, N280 billion equivalent in US dollars was brought into the country and invested in the capital market by Nigerians in Diaspora through wire services. But we did not capture the monies sent through Western union or cash transfers by relatives, since they were not captured by banks."

Okereke said it is now time for Nigerians to buy shares since the prices are very low. She said, "It is time to buy shares as prices are below their book value. They are at their lowest ebb; even the foreigners have started coming back to the market."

Apparently dissatisfied by Okereke's grandstanding, Chairman Senate Committee on Finance Senator Ahmed Mohammed Makarfi (PDP, Kaduna North) said, "I have to interject you here DG. Why are you asking Nigerians to come and buy shares now, whereas the ones they bought have gone with the wind? They have stocks and they don't have money. Buy what? From whom? This is a very serious matter; you have to stop that campaign."

The DG, who appeared along with Minister of State for Finance Remi Babalola, Governor of the Central Bank of Nigeria Professor Chukwuma Soludo, Director General of the Securities and Exchange Commission Malam Musa Al-Faki and the Director General, Budget Office Dr. Bright Okogu, said prices of quoted shares on the stock market were never manipulated as rumoured in some quarters, but the crash in price was worsened by the activities of what she termed "financial prostitutes" who buy shares when they are low and sell it immediately it picks up.

CBN governor Soludo said the challenges that the global financial meltdown posed to Nigeria were enormous and denied ever saying that the nation's economy was immune from the melt down. "On the aggregate the global economic growth is projected at 0.5 percent in 2009. Africa's economy will grow by 3.5 percent, China and India's economies are expected to grow by 7 percent while South Africa's growth is projected at 4 percent. So Nigeria is definitely affected."

Soludo said already, the 2009 budget was a budget of bailout. He said in the last four years, there has been unprecedented budget deficit, so implicit in the various budgets of both Federal and States are elements of bailout for critical sectors.

"So we have to be sure, what do we bailout and how much money do we need to do that? Where will the money come from? Our banks are healthy and sound because we have provided them with liquidity even when they don't need them, and the banks are posting profits every year. Even in 2008 they posted profits. none of them lost, and their projection for this year is that some will post little profit while others will have a flat return, while those that may lose will not to the extent of large scale loss like the ones seen abroad. I think that is the more reason why despite all the pressure, our banks have been able to withstand it."

Minister of State for Finance Remi Babalola told the panel that since the financial crisis was not peculiar to the Nigerian economy, what is needed is to restore confidence and restructure the institutions for the economy to move forward.

"Even if crude should fall below $30 dollars per barrel, it will not affect the implementation of the 2009 budget because we have been saving money for rainy days. The excess crude revenue will be used to inject money into the budget," the minister said.

Chairman of the Senate Committee on Banking, Insurance and other Financial Institutions Senator Nkechi Nwogu (PDP, Abia) said the Senate had mandated them to investigate and proper solutions to the crisis facing the nation's economy.

"Four months ago you came and told us that nothing was wrong with the economy, but now here we are, so the Senate has directed us to find the way forward. What is really wrong with the economy? What can we do and where can we go?"

The Senate had in October last year twice summoned President Umaru Yar'adua's economic team to explain the measures the Federal Government was taking to protect the nation's economy from the global financial meltdown. However, the then Ministers of finance and National Planning, Dr. Shamsudeen Usman and Mohamed Sanusi Daggash, as well as CBN governor Chukwuma Soludo, told the Senate that the fundamentals of the economy were strong.

Last Updated ( Tuesday, 10 February 2009 )