Investors inject N760bn into stock market in three days

The unveiling of the new foreign exchange guidelines for the country by the Central Bank of Nigeria has prompted stock investors to pump huge amount of funds into the market, STANLEY OPARA writes

The Nigerian Stock Exchange reacted positively to the news of the unveiling of the new foreign exchange guidelines by the CBN last Wednesday as the market capitalisation soared by over N760bn, with investors committing huge sums to acquire more shares.

The move by investors to acquire more stocks at this time is hinged on their desire to re-enter the market when share prices are at their lowest, as the market is expected to recover after months of persistent fall.

Prior to the three-day straight gains last week, the NSE market capitalisation had stood at N9.284tn on Tuesday. But as of the last day of trading last week on Friday, the value of the market had soared to N10.044tn.

To this end, analysts at Meristem Securities Limited said the operation of a flexible forex system in an import-dependent economy such as Nigeria would certainly expose the naira to significant depreciation pressures, especially in the days and months to ahead.

“Nonetheless, we consider the new development a bold step in the right direction as it greatly reduces the pressure on the nation’s FX reserves, while also presenting market participants with a liquid and transparent exchange rate system,” they added.

Forex trading under the new guidelines is scheduled to commence today (Monday).

Also commenting, the President, Constance Shareholders Association of Nigeria, Alhaji Shehu Mikail, said unhealthy economic policies of the current government prior to now had been the bane of the country’s capital market.

Equity investors in the country’s capital market had in the first seven trading days of 2016 lost N804tn of their investments’ worth, as the market capitalisation closed at N8.953tn.

The All-Share Index also dropped from 28,370.32 basis points recoded on the first day of trading in the year to 26,034.94 on the seventh trading day.

The market capitalisation of the NSE fell by N811bn in the first 10 weeks of trading this year.

The NSE market capitalisation dropped from N9.75tn on January 4, 2016 to N8.939tn 10 weeks into the year, while the All-Share Index also closed at 25,988.40 basis points from the 28,643.67 basis points recorded on the first trading day of the year.

Investors also made huge losses in the Nigerian equities market last year as the market capitalisation (equities only) of the NSE shed a total of N2.354tn between December 2014 and December 2015.

Source : Punch