Stock Exchange: Investors lose N1trn, blame regulators

Stock Exchange: Investors lose N1trn, blame regulators


… Threaten to embark on protest ‘sell’

  • Invest now that share prices are low – NSE

The consistent slide of the major indicators of the Nigerian stock market has become an agonising issue to investors, as investigations revealed that the shareholders have lost over N1 trillion in 10 months.
While the market operators and regulators insist that the best time to invest in the bourse is when value of shares are low, especially when there is recession, shareholders are perturbed over what they described as negligence and inability of the management of Nigerian Stock Exchange and Securities and Exchange Commission to take proactive measures to cushion the effect of the economic recession on the market.
The shareholders, who spoke with The Point in separate interviews, threatened to embark on protest ‘sell,’ adding that the capital market is no longer the barometer of the economy and that it is not related to the ailing state of the economy but because the regulators have failed to introduce policies that would attract more local and foreign investors to the market.
The President, Nigeria Shareholders Renaissance Association, Mr. Olufemi Timothy, argued that despite the lull, the emerging market is still among the most expensive in terms of listing in Africa and other developing markets across the globe.
This, according to him, is responsible for the moribund state of several quoted companies, which contributed to the over N1 trillion loss recorded by investors in the market.
He alleged that the listing requirements and pricing mechanism adopted by the NSE are unbearable and unrealistic, which had made life difficult for several small and medium scale firms that are now moribund and delisted from the market.
A total of 77 companies have been delisted at the NSE in 10 years. Delisting involves removal of listed securities of a company from a stock exchange where it is traded on a permanent basis.
A review of the list showed that 12 of the companies chose to delist voluntarily; 54 delisted due to regulatory pressure; while 11 of the companies delisted due to reforms/ expansion within the sectors they operated. Some of the companies are Cappa d’Alberto, Big Treat, Tantalizers, Jos International Breweries, West Africa Glass Industries, Navitues Energy, Nigeria Ropes and P.S Mandrides and Company, amongst others.
“About 90 per cent of quoted companies are not measured according to their value. Some of us (the shareholders) are not happy about the way the NSE is handling stock trading. There are lots of manipulations going on at the Exchange, and this is pathetic. Depreciating share value shows a sign of good investment but investors should avoid buying overpriced stocks,” Timothy said.

“About 90 per cent of quoted companies are not measured according to their value. Some of us (the shareholders) are not happy about the way the NSE is handling stock trading. There are lots of manipulations going on, and this is pathetic”

Contrary to the argument of the Stock Exchange that quoted moribund companies should be delisted from the market, leaders of different shareholders’ group have warned the Mr. Oscar Onyema-led NSE to reverse such decision, adding that such development would cause more harm than good to the investors’ confidence in the market.
For instance, the General Secretary, Independent Shareholders Association of Nigeria, Mr. Adeleke Adebayo, insisted that the regulators should allow such companies that are not meeting the post-listing requirements to remain a ‘public focus.’
“Institutional investors may develop interest in such companies and decide to invest in them. We are losing a lot of money in the market. Nobody is thinking of giving forbearance to investors. We need to make some price adjustments not to continue to delist companies, because it is not good for average investors. Let it remain a public focus,” he said.

While investigations revealed that most of the companies delisted voluntarily from the nation’s bourse, citing unfriendly price mechanism and post-listing requirements, stockbrokers said the companies were being delisting for recurring and possibly lack of corporate governance.
The President, Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, in an interview with The Point, disclosed that most of the equities were delisted due to their irredeemable inability to comply with the listing requirements of the Exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues.
In order to avoid future reoccurrence, the CIS boss urged investors to change their investment strategies and avoid falling victims of circumstances in cases where some quoted companies are delisted from the market.
He added that despite the persistent lull in the nation’s capital market, investors should leverage on the current low prices of stocks to expand their portfolio.
Abe stated that investors should buy stocks of companies that renders essential services and produces house hold goods, adding, “Investors should look out for; not only companies that have less forex exposure, but also firms that their services are essential and can generate quick money from sales.”
The Managing Director, Highcap Securities, Mr. David Adonri, also advised investors to identify companies that have potentials of benefitting from new economic policies, such as the agro allied firms, before buying the stocks.
He said that the stocks of such companies stand a chance of yielding good returns in the near future, adding also that investors needed to increase their participation in the market, increase the capitalisation and stimulate the market for a rebound, especially for the prevailing bad time facing the market.
Noting that currently, penny stocks are good, Adonri quickly advised investors to look at the direction of the Nigerian economy, saying, “They should identify firms that can benefit from new policies that can drive the economy. These companies are both large and small companies.”
A stockbroker Mr. Tunde Adegoke, said there is no better time to invest in the stock market than now. “The market was ripe for investment going by the current low prices of stocks. This was the perfect opportunity for investors to stake their funds in the market, especially with the prices of shares at their lowest levels. Brokers are confident that the market would soon begin to stabilise and investors would begin to record significant appreciation on their investments.
“In terms of capital gain if the price appreciates and you decide to sell, you will smile to the bank with big amount of funds if you invest in low price stocks, but for the high price stocks, if the price appreciate the margin will not be much and you can only recoup the capital invested,” he said.

Meanwhile, the Chief Executive Officer, NSE, Mr. Onyema, reassured investors of the commitment of his management to restore lost confidence to the market by easing listing requirements and its price mechanism.
Like other operators, he advised that investors should take advantage of the low prices of equities and invest in the market.
Onyema said; “We believe that taking a portfolio approach to investing provides the best risk adjusted alternative for participating in the capital market. As such, we want to ensure that the NSE provides a repertoire of products that will allow investors to create well diversified portfolios of uncorrelated asset classes.”
He disclosed that the Exchange is unwavering in its commitment to solidify its leadership position as Africa’s foremost securities exchange, and is also committed to initiatives that will position the bourse as an attractive listing and investment destination.
Specifically, the Director General of the Securities and Exchange Commission, Mr. Mounir Gwarzo, expressed his willingness to attract more retail investors into the market, in order to deepen and develop the market.
Gwarzo said this is one of the reasons SEC has embarked on various initiatives like e-Dividend, Direct Cash Settlement, National Investors Protection Fund among others to attract retail investors to the market.
“We have pursued a lot of initiatives in the last year and we are pursuing more this year. We are taking it from a perspective that this market has never witnessed and the perspective is to address some of the lingering complaints of the investors. We believe that the retail investors are the owners of this market, so our strategy should focus on them,” he said.
The SEC DG explained that “as a country, we have only less than two per cent participation of retail investors in our market. Malaysia has 9 per cent; South Africa, 19 per cent; USA, 43 per cent; and UK 13 per cent. So our market is highly less being participated by the retail investors. Due to the dominance of the foreign investors, anytime they move out of the market, the market goes down. Our effort is to see that in the next five to 10 years, we raise the level of involvement of retail investors to at least 5 per cent.”