The Securities and Exchange Commission (SEC) yesterday attributed the slow recovery of the Nigerian stock market to huge margin loans overhang in the market, assuring investors that efforts are being made to ensure a full recovery soon.
Acting Director-General of SEC, Ms. Daisy Ekineh, made this known at a media briefing in Lagos on the performance of the capital market in 2009. The Nigerian stock has been down since March 2008 due to the global financial meltdown. However, while other markets have recovered and are already witnessing growth, the Nigerian market remains on the downside with the likelihood of posting a decline of over 30 per cent this year.
But speaking on the trend, Ekineh said margin loans have affected the recovery of the market as banks and other investors dump their shares once prices witness a little appreciation. “The downturn in the Nigerian market was worsened by the issue of huge margin loans and this has been affecting the recovery rate of the market. Once the market witnesses stability and prices go up, banks and other investors rush to sell to reduce their exposure and debt position,” she said.
The SEC boss, however, expressed confidence that the market will record better stability as measures are being put in place to address the issue of margin loan overhang. “There is no market in the world that goes down and does not come up again. From America, Asia to Europe and even Africa. I can assure investors that the Nigerian market will bounce back. In fact, this is the time to take advantage of the current prices of equities and prepare for the recovery,” she advised.
Ekineh said that one of the things that will assist in the quick recovery of the market is the proposed Asset Management Company (AMC), explaining that once it is established, it will take some of the toxic assets from the banks and stock broking firms.
“This will in turn create liquidity in the system, give relief to operators and investors will now have more capacity to participate in the buying of shares,” she said.
Speaking on the why Market Makers have not begun operations, Ekineh said the sanitisation exercise that put many of banks in dire financial strait could be responsible. To be able to participate as a Market Maker, she said there must be liquidity providers, who are mostly be the banks. She said that with the current state of the banking industry, no bank can play that role at the moment.
Meanwhile, the stock market recorded a turnover of 375.194 million shares worth N2.653 billion in 4,597 deals yesterday, compared with 341.32 million shares valued at N1.57 billion traded in 3,865 deals the previous day. The banking sub-sector led the activity chart, accounting for 234.149 million shares worth N1.698 billion exchanged in 2,150 deals.
However, the NSE All-Share Index and market capitalisation fell as the bears returned to the market. The index fell from 20,607.5 to close at 20,580.77, while capitalisation declined from N4.936 trillion to N4.930 trillion. A total of 64 stocks recorded price changes, 32 gainers and 32 losers.