Policy inconsistency blamed for market downturn

A financial expert has blamed the upward trend in the mon­ey market rate on the volatilities in the Nigerian capital market and policy inconsistency.

Mr. Wale Abe, Executive Sec­retary, Financial Market Dealers Association (FMDA) said the volatilities were because of the socio-political uncertainties and national security challenges.

Volatility is a measure for vari­ation of price of a financial in­strument over time. It is a mea­sure of risk based on the standard deviation of the asset return.

According to Abe, it is a mea­sure of security’s stability calcu­lated as the standard deviation from a certain continuously com­pounded return over a given pe­riod of time.

“The uncertainties had led to investment lethargy as noticed in the sustained dropping of the All Share Index (ASI). The ASI shows the movement in the price of stocks of companies on the Ni­geria Stock Exchange (NSE)”.

He explained that the volatil­ities in the capital market had made foreign investors to pull out their investments following low yields from the listed equities.

“The development had made the stock market to remain un­attractive to both domestic and foreign investors,”

He also said that the down­ward movement in the price of listed equities could be traced to the Central Bank of Nigeria (CBN) induced liquidity through its tight monetary policy, adding that the sustained fall in ASI was a threat that would make the na­tion’s portfolio investment cli­mate unattractive.

He added that short term in­vestors in the capital market pre­ferred to put their money in the money market because of artificial returns noticeable in the money market.Abe explained that the sustain­ability of the upward trend in the money market could only be re­tained by the law of demand and supply.

He added that the force of the law of demand and supply in the ideal and real market made it im­possible for the rates to be manip­ulated.

Relatively, the Central Securi­ties Clearing System (CSCS) Plc has said that the NSE slumped be­low its three-year low in 2015 due to dwindling crude oil price, for­eign exchange problems and exo­dus of foreign portfolio investors.

The Managing Director and Chief Executive Officer of CSCS Plc, Kyari Abba Bukar who stat­ed this, while x-raying the com­pany’s performance in 2015 said: “the market was negative­ly affected by the unstable Nai­ra exchange rate which discour­aged foreign investors from the market.”

He also disclosed that CSCS has introduced an Electronic An­nual General Meeting (AGM) the first of its kind in the country.

Commenting on the perfor­mance of the company in 2015, Kyari said “These outcomes were unfavourable to our finan­cial performance and led to a de­cline in our income by 7.77 per cent in 2015 with total earnings of N7.6 billion as against N8.2 bil­lion in 2014.