There are fears that recent events pertaining to the 14 other banks where the CBN final report is still being awaited may halt further gains in the market. These fresh fears are hinged on the seizure of the traveling documents of some chief executives of the 14 banks and the state security service (SSS) surveillance of their movements even when the CBN insisted that its final report on their state of health would be released sometime in October.
The way things are now, capital formation and extension of credit have become frozen, with adverse implications for business expansion and national economic growth and development. Indeed, there has been a sustained erosion in the value of investments in the stock market, including investments by Nigerians in the Diaspora and the pension funds.
Market operators opined that continuing downtrend in fueling capital flight from the country as an increasing number of Nigerians – both local and in the Diaspora – are beginning to look beyond our borders for investment options.
They argued that the economy cannot afford further distinction of savings on top of the N6.91 trillion in savings lost in the last eighteen months as a result of the stock market meltdown.
According to analysts at source capital, “the N6.91 trillion in savings lost is equal to 62 per cent of total government expenditure in the last five years. It is equal to 29 per cent of the total Gross Domestic Product (GDP) for 2008”. Nigerian investors, individuals and institutions including their foreign counterpart would like to see an early recovery stability on the stock market.
And in this regard, the Chartered Institute of Stock brokers (CIS) insists that there is an urgent need for further government stabilization initiatives in the economy, especially in view of the wider social implications of a continued downturn in the economy CIS and the Association of Stock broking Houses of Nigeria (ASHON) had commended the injection of N420 billion into the five weakest banks noting that it would go a long way in addressing the lingering confidence problem of the industry.
However, they maintained that the CBN initiative needed to be reinforced and maintain the momentum generated.
The operators posited that it has become necessary to follow-up the CBN action with complimentary programmes to address the other similarly impacted segments of the financial system and the observable slow down in the wider economy. The benefits of further government intervention have been kinted to restoring stability to the economy and the financial markets with a view to facilitate the management of banks’ exposure to the economy.
On the other hand, stabilisation of the stock market will boost investor confidence, re-ignite domestic capital formation and long-term savings and stimulate economic activity by providing financing for business expansion, expanding employment opportunities and boost government revenue through taxation.
It is also believed that the process would also encourage inflow of foreign investment as a supplement to domestic savings and provide financing for government’s infrastructural development programme.