..says illiquidity constraint currently besieging stock market
Capital market investors have called on the Federal Government to urgently promote national savings culture through incentives that would improve patronage in the retail segment of the market.
According to them, this is to achieve stock market stability, and the need for the Federal Government to continue to moderate the rate it offers its debt instruments –Treasury bills and FGN bonds, so that portfolio investors will be compelled to look for alternative instruments with better returns.
The Nigerian Exchange Limited foreign portfolio report confirms the growing apathy to local investment in the capital market.
Despite investment opportunities in the Nigerian equities market, given the relatively low prices of stocks, 2020 saw a total foreign outflow of N481.93 billion against an inflow of N247.27 billion while in the month of February 2021, foreign outflow of N39 billion from the equities market was recorded compared to an inflow of N23 billion.
The investors, who expressed worry about the illiquidity constraint that is currently besieging the stock market, stressed the need to generate more savings within the country through incentivised voluntary measures to substitute foreign capacity.
According to them, part of the current downturn in the market was due to sell-down by foreign investors owing to uncertainties that surround the macro-economic environment as well as their inability to repatriate dividends.
Indeed, the overall weak macro-economic scenario sustained negative market sentiments in the past few years, coupled with the tensed socio-political space.
They argued that market stability could only be achieved through improved long-term savings, noting that increased savings would also accelerate development and bolster the economy.
Reacting, the President, of Standard Shareholders Association, Godwin Anono, said that long-term savings would spur activities in the primary segment of the market and accelerate economic growth.
He further noted that the level of savings in an economy has a multiplier effect on its investment.
Anono pointed out that the government must introduce the right incentives to encourage more people to save on a long-term basis and spur investment activities in the market.
He added that it was desirable for the government to seek how to moderate the influence of foreign portfolio investors in the Nigerian capital market by boosting increased domestic participation in the market.
The Chairman, Integrated Supreme Shareholders Association of Nigeria, Owolabi Peter, argued that there was also a need for market participants to explore various mechanisms and mobilise savings in order to boost liquidity in the market.
“The market is nose-diving now because there is no liquidity. There is no support for the market again because of illiquidity. There is a need for a proper national savings plan that would enable people to put money aside for investment and be sure they will get some kind of incentive that would make them take up that policy. We don’t have good savings culture and we need to develop one,” he said.
An independent investor, Amaechi Egbo, explained that if there were no savings, there would be no investment.
He argued that Nigerian workers should embrace the culture of savings in order to provide more viable exit plans in the face of voluntary or compulsory disengagement.
He added that these savings would be channelled to the stock market where the individual can monitor the movement and performance of the stocks and take an appropriate investment decision.
“It is a culture that needs to be developed and once it is developed in Nigeria, we will have enough savings and can now channel these savings to invest in the capital market and other areas of the economy” he said.