INVESTORS lack of confidence in Nigerian capital market in the last decade

INVESTORS in recent times has lost confidence in the Nigerian capital market due to what was described by experts as the worst crisis to hit the Nigerian stock market in the first half of 2008.

Investors’ wealth was reduced by a significant two-third of the market total value from nearly N13 trillion to a little over N4 trillion.

The meltdown in stock prices, the worst recorded in the history of the 59-year-old market earned the Nigerian Stock Exchange (NSE), the highest declines posting amongst other African exchanges in the first quarter of 2009.

This is due to huge bad loans granted by banks to operators in the market.

The meltdown brought the value of stocks to an all-time low in an analysis by Bloomberg, an international financial media organisation.

Another major loss of investors’ confidence is due to shady broker activities in the equities market, brokers not declaring actual price portfolios were sold to investors, profit margins that should be gained by investors are reduced to the barest minimum.

For example, stockbroker and former managing director of First Alstate Securities Limited, Tajudeen Folaji was sentenced to seven years imprisonment by the Lagos State High Court over fraudulent sale of his client’s shares, according to reports,

The Lagos State High Court presided over by Justice Kudirat Jose found Folaji guilty of unauthorized sale of shares and stealing for fraudulently converting 31,886,200 units of IPWA Plc shares worth N331,297,618 belonging to an investor on April 3rd, 2008.

Sequel to the ruling, the Securities and Exchange Commission (SEC), the regulators of the capital market, has been advised to be stricter on stockbroking firms that are found guilty of ripping investors off their portfolios.

Though SEC has penalised a couple of stockbroking firms in the past, the shady deals have not been fixed completely.

There are modern-day trading protocols that allow investors to watch the market and monitor their portfolios directly themselves, information can be directly transferred from trading applications to Bloomberg without manual intervention, the major one is the FIX Protocol (Financial Information Exchange).

FIX Protocol is an agreed financial protocol used in sharing financial information between financial systems in the financial industry. With these protocol, investors can directly watch the market and make investment decisions themselves.

SEC can instill this protocol as mandatory to all exchanges and stockbroking firms with trading platforms in Nigeria to help make transactions transparent and boost investor confidence.

Over time there have been a series of complaints from investors losing huge investments due to the shady deals happening in the capital market.

The 3 major exchanges in Nigeria which are the Nigerian Stock Exchange, NASD OTC Securities Exchange, FMDQ Securities Exchange also need to help investors monitor transactions and help create alert systems on any investor transactions that were executed, the exchanges also has a role to play in securing portfolios for investors.






     

     

    The number one settling house of Nigeria the Central Securities Clearing System Plc also has a large role to play as the custodians of all investor accounts in Nigeria. The settling house can also scrutinize every transactions on any account and make sure any transaction on an account the investors are fully aware and investor receives their proceeds accordingly.

    Also, the three major exchanges in Nigeria should implement fully their whistleblowing program so that (an employee, an investor, a compliance officer, an Issuer, a stockbroker or any member of the public) to report possible violations of the rules and regulations of the Exchange, the securities law and fraud related to activity within the market run by The Exchange.

    Indeed, the persistent apathy and waning investor confidence that have bedeviled the nation’s stock market in the last decade continued to reflect on market indices and trigger persistent fall in share prices of listed firms as most blue-chip stocks have fallen 10-year low.

    According to the NSE, polls trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows, domestic transactions in the nation’s bourse decreased by whopping 66.68 per cent from N3.556 trillion in 2007 to N1.185 trillion in 2018.

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