TO increase the level of performance in the stock market, there is a need to enhance the level of corporate governance, as well as strengthen the risk management framework in the market, an expert has said.
Besides, the supervision and regulation of financial sectors should be strengthened, with a focus on risk management.
Speaking at a PEARL Awards public lecture in Lagos recently, the Chief Executive Officer of Anchoria Investment and Securities, Olusola Dada explained that the Stock Exchange plays a central and indispensable role for which it has been variously described as the “hallmark or heart” of the capital market.
According to him, this is so because the Stock Exchange is a market for trading on outstanding issues.
He explained that the opportunity which it offers for the subsequent trading in existing securities has made it a decisive factor in the success of many corporate issues and, by extension, the efficiency of capital formation in the economy, adding that the availability of a secondary market engenders capital formation and socio-economic development.
“The mere presence of a stock market in the country is a boost to the international investment climate of the country, as it raises the chances of additional local financing for both foreign and local direct investment. In an economy like Nigeria, where the banking sector is battling with credibility problem following the systematic distress of the financial sector, the stock market plays a morale boosting role to investors.
“It can only be imagined what the investment in the real sector would have been if the stock market had not been in place. The stock market provides opportunity for investment diversification. In the absence of the stock market, a large part of the wealth currently invested in the Nigerian Stock market would have been diverted to foreign countries.
“ The market further remains a viable institution for holding back capital flight which has been identified as one of the causes of the country’s economic underdevelopment.
“The market played an unrivalled role in the implementation of the privatization exercise as it did during the implementation of the indigenization programme. Between 1988 and 1992, 35per cent of public enterprises were privatized through public offer of shares. The offers totaled 1.2 billion shares valued at N1.5 billion. This represented 5 per cent of the market capitalization in 1992.”
The privatization exercise, according to Dada, created awareness of the investment opportunity in the capital market, attracting 0.8 million new shareholders, amounting to a 200 per cent increase in the number of new shareholders.
“The gains to the economy in terms of efficient operation of the privatized enterprises and relief to Government of the burden of subvention of the firms are some of the contributions of the Exchange to the economy.”
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