- Time to breathe life into the economy
The Nigerian Stock Exchange (NSE) has seen many bearish months and days, but last week’s Monday, November 30, was particularly a low point. According to Reuters, the NSE, the second biggest weighting after Kuwait on MSCI frontier market index, shed 0.84 percent on thin volumes to close at 27,385, a result last experienced in December 2012. Shares on the market lost 6.5 percent in October and another 6.1 percent in November, as many traders, particularly foreign investors stayed on the sideline, awaiting government’s fiscal policy.
While the Security and Exchange Commission (SEC) is planning new listings to buoy the market, the Federal Government must urgently set its economic plans afoot, to starve a crash.
Like the national economy, the stock market is faced with recession, and this is worsened by near economic inactivity, six months after the Buhari government came to power. But the Chief Executive Officer of the NSE, Oscar Onyema, has argued that the exchange is not the only one affected by the global economic challenges. He noted that of the 24 Exchanges in Africa, 20 are declining. Specifically, he argues that: “If you look at large, mid and small cap securities, mid cap securities have done well, they have returned six percent positive. Now the whole market is about 18 percent down and that is because of the weight of large cap securities”.
On its part, SEC is seeking ways to encourage new listings on the stock exchange, particularly the small and medium enterprises which the NSE chief executive argues, are doing better than the big stocks. According to the Director-General of SEC, Mr Mounir Gwarzo, at the third quarter post-capital market committee media briefing in Lagos, “we are willing to relax some of the listing and disclosure requirements to encourage listing of SMEs”. The SEC boss also announced that his commission is collaborating with the Federal Government on tax incentives and exemptions for companies that want to seek listings.
Furthermore, the SEC is seeking to get the telecommunication companies to list on the exchange. Indeed, there is no explanation why the telecommunication companies are not listed already. But as the saying goes, “better be late, than never”. As part of incentives, Gwarzo said, the SEC is working to reduce the transaction cost, to encourage more listing in 2016. Again, he announced plans to establish a new commodities market, in line with the Federal Government’s policy to boost the agriculture sector. Much as the SEC plans to buoy the future of NSE, the immediate challenges must be addressed, to stem the slide of our national economy.
In this regard, many have argued that the foreign exchange regime of the government is affecting the stock market. While the government must find a way around the crisis, we doubt if a relapse to the old era of unrestrained trading in forex is in our national interest. Perhaps the solution is in buoying the purchasing power of the consumer. Of note, the consumer goods index fell down by 22.24 percent, in the stock market report, and that is a serious indicator that the purchasing power of Nigerians has greatly declined. Also, the index of the top 10 banks had shed 19.9 percent within the period under review.
The sharp decline in the market value of the stocks has resulted in high rate of job losses across the economy. Investors, both local and foreign, must be worried that three weeks after the inauguration of the federal executive council, the government of President Muhammadu Buhari is yet to chart a clear economic plan, and the NSE is paying a huge price for this.
