The Nigerian capital market traditionally has been known as being driven by Nigerians, as they form the bulk of investors in the market. But the question now is: could the market be said to be driven by Nigerians today?
In the wake of the current recapitalisation of stock broking houses to the tune of N500 million, a cross section of retail investors have began nursing fear that their stock brokers would not meet the new capital base and, as such, do not want to be caught unawares.
The Tide’s findings reveal that the general feeling in this quarter is that retail investors are not wanted in their market, hence there has been a renewed interest in the market by this class of investors, this time around, to sell all that they have in the market and give way for the target foreign investors targeted to project the market to global prominence.
Emerging facts allege that on-going developments in the market points to have targeted this class of investors to force them to conform to specific market direction, failure of which they would have no other alternative than to flee for safety by dumping their shares in the market.
Our reporter learnt that the specific market direction is tied to recapitalisation of stock broking companies and its collective scheme. The retail investors who prior to the pronouncement of recapitalisation of stock broking firms last December have been reluctant to embrace collective investment which may have no option when the deadline for it expired by December 31, 2018.
A survey carried out by The Tide reveal that fund managers, whose stock broking firms have already met the new recapitalisation base of N500 million and mopping of investments for institutional investors and retail investors who are taken care of by grassroots stoke broking companies likely to be unable to meet the order have commenced dumping their shares in the market for fear of uncertainty.
Though, it is being alleged that some investment companies with subsidiary stock brokers have been on the vanguard of creating monopoly in the market by chasing out other ‘margin’ players, this they believe could be achieved by selling the idea of recapitalisation to the securities and exchange commission.
A stockbroker who spoke on condition of anonymity to The Tide said: “the retail side of the stock market has already had so much battering in the past, the retail investors no longer approach the market for purchasing, what they now do is that they are just selling off what they have, and after selling, they don’t come back”.
The broker added that retail investors no longer approach the market for purchasing stocks, they only approach the market to sell off what they have in the market after which they will no longer return to invest in shares.
Dr. Francis Olubike, Managing Director/Chief Executive Officer of Standard Securities Limited, Port Harcourt, told The Tide that recapitalisation has a major role it is playing toward that direction.
How? Most of them are so much in touch with the so-called medium players in the market, most of them are not in touch with the highest flyers supported by financial institutions among others that have even met the N500 million capital bases, and even surpassed it, because they have backings of banks”, he said.
He stressed that in stock trading, there are stock brokers who are in touch with retail investors that are really disenfranchised in the recapitalisation matter.
According to him, now when retail investors hear about N500 million capitalisation, they would become nervous. Some of the stock brokers that buy shares for the Nigerian retail investors may not meet up with N500 million capitalisation. So, what they are doing currently is to sell whatever they have, in order for them not to lose anything at the end of the day when the deadline given by SEC: expires December 31, this year.
Olubike continued that the regulatory directive by SEC has stalled the purchase end of the market, which he described as being comatose because the investors are not encouraged to invest in the market.
Chief Ray Effiong, an investment analyst, told The Tide that the issue of recapitalisation has also continued to weaken the primary end of the market.
According to the expert, the prevailing market trend has continued to impact the market, especially in the direction of fulfilling its obligation as instrument for sourcing cheap funds for corporate organisations.
To this end, he said, while the primary market has remained comatose, the IPO market has also remained in limbo because confidence of the investors in this segment cannot be secured.
As he puts it, “the issuers are not coming up with IPOs because they are not sure of half subscription talkless of full subscription as the case was previously when issuers were assured of one hundred per cent subscription, and at the end, they will record over subscription, some even recorded one hundred per cent over subscription”.
He added: “issuing housing are not eager to issue IPOs anymore because they are not getting underwriters to write-off the offer before it opens. They are not underwriting because they cannot guaranty the offer. Between 2008 and now we cannot count the number of firms that have issued IPOs.
It was further gathered by this weekly that companies are continually starved of funds for expansion and the possible of doing so from the market and issuing rights proved abortive as a result of the challenge for raising Eurobonds as an acceptable rights in the local market that become more difficult.
Professor Kingsley Omokhani, Managing Director of Pendulum Securities Limited, Asaba, Delta State stated in Port Harcourt that the new recapitalisation order would not force retail investors out of the market, but would ensure that they are better placed in more buoyant companies.
He stressed that the recapitalisation order would end up creating mergers and acquisitions in the sector which would further reveal that emerging companies post-capitalisation will have special products to accommodate all classes of investors, including retail investors.
According to him, what is currently going on in the case of recapitalisation does not concern retail investors, but it will boost their investment confidence, hence they would now be dealing with highly capitalised stockbroking companies.
Omokhani further disclosed that when the recapitalisation is concluded, the companies that have emerged post-capitalisation order deadline would have some products designed for retail investors.
“There are unit trust schemes and portfolio investment schemes. Some firms would carve a niche for dealing with retail investors in the new dispensation in Pendulum Securities Limited, we have products designed for retail investors.
“The retail end of market and mutual benefit of the market will be stronger, post-capitalisation and all these are for the hitherto unprotected retail investors. Unit trust investment scheme will be more highlighted” he said.
Dr. Sarah Anikulemi, an economist and Head of Marketing Department at the University of Jos, in her contribution on the recapitalisation told The Tide that even as the recapitalisation hammer slammed against stock brokers expires by the end of this year, targeted to boost market confidence and the case of protecting retail investors in the market need to be given utmost priority by the capital market regulators.
As she puts it: “we have instructed our clients to always have stock broking companies that have solid base. One or two of them may qualify for the new capital base, but that is not enough, the regulatory authorities need to put measure in place to protect all retail investors on the market”.
Lending credence to recapitalisation, a university don and chairman of Rivers State University Microfinance Bank, Nkpolu, Port Harcourt, Prof Adolphus Joseph Toby stressed that he has faith that stockbroking firms would meet the new order of recapitalisation.
He, however, added that if otherwise, he has the option of migrating to a more qualified stockbroking firm.
He said that he is not harbouring any fear on being forced to migrate to collective investment scheme which he has not subscribed to, but will always find a reliable stock broking company to move his stocks to.
Toby, a professor of corporate finance added. “I am dealing with a more reputable stockbroking company, but if it fails to meet with the recapitalisation order, I will then move my stocks to a new stockbroking firm that meets the capital base. I will not embrace collective investment scheme, but go to a stockbroking company that meet the capital requirement”.

Bethel Toby