By Gbenga Agbana

Thursday, 11 Nov 2010

Strong indications emerged on Wednesday that the stock market is set to experience a major rally, as the indices of corporate performance shot up by 2.8 per cent in the last two says, indicating that investors are gradually renewing interest in the market.

Specifically, the market capitalisation of the Nigerian Stock Exchange, rose by N210bn on Tuesday and N11bn on Wednesday, indicating a gain of N221bn in two trading days.

The All-Share Index of the NSE also increased by 2.8 per cent, from 24,728.08 points on Monday, to 25,416.21.

Market analysts attributed the dominance of the bulls in the last two days to the Asset Management Corporation of Nigeria’s plan to buy about N2.2tn toxic assets off the books of banks and relieve banks of their liabilities on margin facilities.

The plan, if implemented, according to analysts, will enhance the value of some stocks in the stock market and enhance the ability of banks to lend to every sector of the economy.

The management of AMCON had on Monday approved the purchase of all the loans in the banking sector, including the total non-performing loans of banks rescued by the Central Bank of Nigeria last year.

The corporation, which disclosed this after its first board meeting, held in Abuja, said the total loans to be purchased was in excess of N2.2tn.

Responding, The Chairman, Ibadan Zone Shareholders Association of Nigeria, Chief Aderemi Oyepeju, said, “The move by the management of AMCON will enhance the liquidity of the stock market and the share prices of some stocks will rise.”

The Secretary of the Independent Shareholders Association of Nigeria, Mr. Adebayo Adeleke, also said, “Some liquidity will come to the banks and the prices of stocks concerned will rally.”

The Managing Director of Partnership Investments Limited, Mr. Victor Ogiemwonyi, commended the management of AMCON on the move to buy off the toxic assets of banks.

He added that the move would help stocks in the market and also enhance the ability of banks to resume lending to all the sectors of the economy, thus enhancing economic growth.

Source:Punch