Nigerians lose N8tr in capital market
By Mathias Okwe, Emeka Anuforo (Abuja) and Gbenga Agbana (Lagos)
THE National Council on Finance and Economic Development rose from its yearly national conference at the weekend with a verdict that the global economic crisis poses a threat to the growth and development of the Nigerian economy.
The council, therefore, advocated that immediate, medium and long-term measures be taken by all tiers of government and the organised private sector to mitigate the impact of the meltdown
This is coming as The Guardian investigation shows that Nigerian investors have lost up to N8 trillion to the crisis in the stock market.
The statement read by the Minister of State, Finance, Mr. Remi Babalola, at the end of the meeting in Makurdi, also called for the improvement of the public financial management.
This, the statement observed, entails sound budget preparation and effective execution, focusing on accountability and transparency.
The conference noted "that the government should eliminate inefficiencies, corruption, leakages and rent-seeking activities, especially in the downstream petroleum sector; that domestic resource mobilisation should be enhanced by expanding the non-oil sector, ensuring that revenue generating MDAs fully declare earnings, and undertaking positive reforms in the Customs service and ports; that the productive sector, (agriculture, gas, solid minerals etc.) should be diversified; and that there should be renewed focus on governance issues both at corporate and public sector levels.
The conference also submitted that the provision of infrastructural facilities like power, road/rail transportation, among others, should be seriously improved through the public-private partnership programme.
"This will enhance real sector productivity and stimulate the economy," the statement stressed.
The conference charged government to develop the political will to initiate sustainable reforms even when such reforms appear painful and hurt parasitic interests. Participants also stressed the need for the deepening of the financial system by revolutionising critical support areas like credit and payment system. This, in their view, would help to restore public confidence in the industry.
The conference had in attendance Benue State Governor, Gabriel Suswam; Minister of Finance, Dr. Mansur Mukhtar; Minister of State for Finance, Mr. Remi Babalola; the Accountant-General of the Federation, Alhaji Ibrahim Dankwambo; Commissioners and Permanent Secretaries from the Federal and State Ministries of Finance and States' Accountants-General.
Other participants were drawn from the Federal Ministry of Finance, Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Central Bank of Nigeria (CBN), Debt Management Office (DMO), Nigerian National Petroleum Corporation (NNPC), Infrastructure Concession Regulatory Commission (ICRC), Securities and Exchange Commission (SEC), National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), and such other dignitaries responsible for the management of the nation's finances.
The Vice President, Dr. Goodluck Jonathan, was represented by the Executive Governor of Enugu State, Sullivan Chime.
Market corrections may not be enough to describe what has happened in the stock market in the last 12 months, as investors are now lamenting the record losses of about N8 trillion in a market hitherto considered a safe haven among its peers around the globe.
For instance, the All-Share index which lost 45.8 per cent between March and December 2008, down by 26,539.44 points, closed at 31,450 points, much lower at 31,450.78 points in January, but crashed further to close at 21,003.42 points last week, while market capitalisation closed even lower at N4.7 trillion.
The Nigerian stock market swung into recession in 2008 in what has turned out to be the longest and deepest price decline in its history. The depression was unexpected, coming only a few months after the Nigerian Stock Exchange (NSE) celebrated the increase in daily value of trade to N1 trillion.
Over the past two years, the Nigerian market was being acclaimed worldwide as one of the fastest growing and the most profitable in 2007, having returned 74.7 per cent in the year. At that time, Nigeria was believed to be immune to developments in the global market where major stock exchanges were already recording huge losses in the wake of the credit and liquidity crisis.
Rather, Nigeria benefited increased FDI inflows and foreign remittances as investors thronged markets looking for high returns.
The market, however, started to decline as from March, following the confusion regarding margin lending and the harmonisation of the year end of Nigerian banks, which was to begin in December 2008.
The mad rush by banks to boost their balance sheet led many of them to recall their margin facilities, precipitating massive sale of shares, in the midst of the confusion, panic set in, thus prompting many local and foreign investors to exit the market.
The initial regulatory response was to peg the maximum daily downward price movement to one per cent while still allowing five per cent upward movement. This was later harmonised to five per cent both ways. The Securities and Exchange Commission also published the rules on the Market Makers as well as the Share Buy Back Scheme. However, all these failed to reverse the declining price trend. The market has been overwhelmed by serious liquidity crisis, extreme lack of confidence and capital flight.
By December 2008 ending, the NSE all share Index had lost 45.7 per cent while the market capitalisation lost N3.2 trillion to close the year at N6.957 trillion from N10.18 trillion in January. From its peak performance in March, the picture appeared even gloomier with the Index losing 52 per cent and market capitalisation dropping N5.68 trillion.
From being the best, the Nigerian stock market ranked among the worst in 2008. In Africa, apart from Egypt, which lost 56.43 per cent, Nigeria ranked below South Africa, which lost 25.72 per cent and Kenya with a loss of 31.33 per cent. Ghana, Tanzania and Tunisia, however, gained 40.68 per cent, 21.26 per cent and 10.65 per cent respectively, probably reflecting their limited exposure to global events. Nigeria also performed below other mature markets such as United States (USA), Japan and United Kingdom (UK), which lost 34.34 per cent, 42.12 per cent and 31.54 per cent respectively.
However, many quoted companies released good results during the year. This helped to boost transactions on the exchange by 39.85 per cent as a total volume of 193 billion shares valued at N2.4 trillion were exchanged, compared with a total of 138 billion.
