‘Early rebound of Nigerian stocks not in sight’

INVESTORS in Nigeria’s capital market, now groaning over the loss of about N7 trillion to recent stock crash may wait longer than anticipated for valuable return on their equities.

A study carried out by some local and foreign firms has showed that stocks would not come near their old values this year or thereafter.

In a report released by Proshare Nigeria Limited, in conjunction with InvestIQ of the United States of America (USA), Value Fronteria, Meristem Securities Limited and the Share Support Services Team painted a gloomy picture for the industry. It asserted that the nation’s equities market “may be unable to reach the 2007 levels in 2009.”

To restore investors’ confidence, ensure transparency and greater level of professionalism in the sector, the report canvassed that the leadership of the capital market’s regulatory bodies be restructured.

Besides, the document called on the government to promulgate an Act that would make telephone companies’ shares to be listed on the Nigerian Stock Exchange (NSE).

It said: “Year 2009 will still remains difficult, until the chronic loss of confidence in the efficiency and transparency of the nation’s capital market is restored. This will not be a 12-month job though.

“Return of investors’ confidence is not expected till second quarter of 2010, unless critical corrections are made on the market, as 2009 would be the year for settling a lot of things, therefore, full recovery is not possible.”

The report said besides the global meltdown, the regulatory bodies contributed a lot to the crisis in the capital market.

“The problem we have seen today was much bigger than what everybody thought. There was a bit of pressure on the Securities and Exchange Commission (SEC), the NSE and the Central Bank of Nigeria (CBN), which led to some panic statements that undermined investors’ confidence. These institutions contradicted themselves on more than two occasions.

“There is therefore an urgent and compelling reason to address leadership failures that occurred during the ensuing crisis, to ensure that those in charge of the market are more responsive, open and able to state facts that ultimately protect investors’ funds.

“Currently, the regulation of the capital market is improper and has left room for a lot of uncertainties, which could have been avoided,” the report stated.

It noted that the downturn in the Nigerian capital market “was without precedence.

“What became increasingly clear as we waded through the data, interviews, surveys and analysis, is that the current downturn is fundamentally different from anything we have experienced.

“Most analysts agree that the real challenge may however not be in the simple focus on the market meltdown, but the unaddressed leadership meltdown in the management of the economy and the markets that we should be focusing on,” the study pointed out.

To bolster liquidity and promote access to equities that could enhance investors’ confidence, the report suggested that the nation’s Global System for Mobile Communications (GSM) and other telephone stocks to be listed on the NSE.

“The telecommunications sector has continued to actively contribute to the Gross Domestic Product (GDP) of Nigeria. The percentage share of GDP from the sector rose from 0.06 in 1999 to 2.39 in 2007, at 1990 basic prices.

“Major investments are being made in the continent by operators of MTN, Zain, Vodafone, Orascom, France Telecom, MIC, Etisalat and Portugal Telecom. The government needs to pick up the pace to ensure that sectors like telecommunications come to the market to make reform and add liquidity.

“Investments in the telecommunications sector in the last six years have been estimated at $12 billion and are expected to grow as more operators, drawn from different segments of the industry, expand the frontiers of the telecommunications landscape.

“Overall, with an enabling environment, which continues to get better, the making of mega profits by telecommunications companies is bound to continue and ownership of stakes in them would be a landmark achievement for the government to consider, as part of the review of the operating business environment.

“The introduction of these companies on the NSE will help to energise the market.”

For now, Starcoms Plc is the only telephone company listed on the nation’s stock exchange.