LOW level of monetisation of economy, high level of inflation and level of private sector credits have been identified as factors affecting stock market performance in Nigeria.

Speaking at the yearly PEARL Awards lecture for capital market development in Lagos recently, the Chief Executive Officer, Anchoria Investment and Securities Limited, Dr Olusola Dada explained that the level of stock market performance in Nigeria has remained relatively low, despite the various reforms put in place by the monetary authorities to enhance its performance.

He said although the level of interest rate has remained very high, the level of private sector credits has not sustained the desired level of new investments necessary to facilitate economic growth.

Dada, in his paper presentation titled: ‘Enhanced Capital Market Growth, Recovery and Stability: Path to Sustainable National Economic Development,’ pointed out that for the capital market to facilitate economic growth, government must encourage more foreign investors to participate in the market in order to enhance its capitalisation.

According to him, there was need to restore investors’ confidence in the market by regulatory activities that portrayed transparency ,fair transactions and dealings in the stock market.

He also expressed the need to ensure stable macro-economic environment to attract foreign multinational companies or their subsidiaries to be listed in the nation’s bourse.

“The value of transactions in the Nigerian Capital Market must be boosted and there should be availability of more investments instruments such as derivatives, convertibles, swaps and options in the market. The level of corporate governance in the stock market must be enhanced and the risk management frame work strenghtened.”

He added that  the supervision and regulatory framework in the financial system must be strengthened with focus on risk management.

He noted that the existence of a well –developed capital market would enhance the efficiency of the allocation of financial resources, as well as play a major role on the capital account of the country’s balance sheet.

“Experience in recent decades has been that bank-based financial systems have not always been able to adequately meet the need for capital, especially long-term capital. In this regard, capital market development increasingly has been seen as a critical factor for the long-term growth prospects in emerging markets.

“The further development of a domestic market will not only provide local investors with a variety of investment opportunities, but also give them alternative instrument that can be used to substitute for foreign instruments. The result is that a large share of domestic savings will be used to finance domestic investments," he added.