In this exclusive interview, the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON),Chief Onyenwechukwu Ezeagu, a Fellow of the Chartered Institute of Stockbrokers (CIS), speaks on a range of market development issues, including the call on the Central Bank of Nigeria (CBN) to re-visit margin lending to improve liquidity in the Capital Market.
At last, demutualization of The Nigerian Stock Exchange has been concluded. What next for ASHON members?
The successful completion of the demutualization process was a great delight to Securities Dealers. Our members have eagerly expected this transition with high hope. We expect to reap the benefits of shareholding in a fledging Stock Exchange, one of the best in Africa
The Capital market operators and regulators have done a lot to educate investors on the benefits of demutualisation. To what extent would you say that investors have fully grasped the concept and what is the way forward ?
The local investors quite frankly grasped the concept of demutualisation after our members have spoken to them in the language they understand i.e. demutualisation means that Securities Dealing Firms have transformed from being Dealing Members Firms to shareholders and Trading License Holders. We have local investors who are well informed. However, we still need to guide them to follow the consequential changes that may follow the Exchange’s new orientation towards profit making.
What role can the government play to improve liquidity in the stock market ?
The Central Bank of Nigeria (CBN) should reintroduce the margin facility to help improve liquidity in the market. It should, in conjunction with Capital Market Operators design effective guidelines that will de-risk the product to avert past experiences in margin lending in the market. The margin terms and conditions should also be reviewed in line with the current realities.
What other policies should the government put in place to support the growth of the Nigerian Capital Market ?
The government should patronize the capital market – the taste of the pudding is in the eating. This will spur others, including foreign investors to believe in the market. The government should urgently consider the proposal by the Securities Dealing Community ably represented by The Chartered Institute of Stockbrokers (CIS) and the Association of Securities Dealing Houses of Nigeria (ASHON) through Capital Market Master Plan Implementation Committee ( CAMMIC) on the rejuvenation of the market as part of the financial system review currently being worked on.
The market is undergoing a period of negative return on investment due to high inflation rate. Which sectors of the market would you advise investors to position to hedge against inflation ?
We do not as a matter of professional policy mention specific sector or stocks. Nevertheless hedging against inflation cannot be achieved by a singular act but by a professional management of fiscal and monetary policies by the authorities. This is more reason why investors should be closer to their securities dealers.
What can you make out of the recently released Q1 results ?
The Q1 results could not have been anything better given the conditions prevalent within the period. The Covid-19 pandemic has moderated all activities and the results show clearly in all aspects of the world economy.
What is your outlook for the securities market ?
The stock market could be said to have become resilient to upheavals in the economy but with the heightened insecurity, we want to believe that the market will survive given that opinion leaders have continually advised the actors to jaw-jaw rather than war-war. We all need to tone down our words and actions for our country to avert catastrophe and ensure that our economy is sustained.
Foreign Portfolio Investors (FPI) have continued to reduce their participation on the market. What will you ascribe to this and the way forward ?
The Foreign Portfolio Investors (FPI) are highly sensitive investors. They react to little negatives not to talk of when mainstream media give subtle hints of insecurity in the land by various scary headlines. The penchant for policy somersaults and arbitrariness of actions by the authorities does not give impetus to the attraction of Foreign Portfolio Investors.
As the Chairman of Lagos Commodities and Future Exchange (LCFE), how will the Exchange boost investment in agricultural value chain ?
The Lagos Commodities and Futures Exchange (LCFE) has started by creating awareness of the potentials in the value chain. It is working closely working with the Securities and Exchange Commission (SEC) in registering assayers, warehouse people, farmers, out-growers scheme, etc. We are advising that the Central Bank of Nigeria (CBN) should not allow its proposed intervention to be skewed towards one of the commodities trading platform so that there will be even growth within the commodities market sector.
How can ASHON improve on investor education ?
Investor education is a continuous process which demands a collaborative efforts among stakeholders. ASHON has been collaborating with the SEC in the literacy development programme and we have continually engaged our clients on individual basis, providing answers to their enquires and volunteering information where necessary.