By Udeme Ekwere

The market capitalisation of listed equities on the Nigerian Stock Exchange has dropped by N517tn or 5.8 per cent in the last one month.

Trading activities had improved significantly when the Asset Management Corporation of Nigeria began operations last year, hitting a high of N8.885tn on January 25 this year.

But activities began to drop steadily after that, leading to a loss of N517tn to close at N8.368tn on Friday.

Analysts, at the beginning of the downslide, had linked the decline to profit taking activities of investors, who were trying to cash in on the gains recorded at that time.

However, further findings by our correspondent revealed that the losses were also as a result of heavy sell-offs by some stockbroking firms, which had foreign investors as their major clients.

Specifically, major investment institutions such as RenCap Securities Nigeria Limited and the stockbroking arm of Stanbic IBTC Plc, as well as Afrinvest Limited (which was recently suspended by the NSE for inadequate capital base) have foreign investors as major clients.

Investigations by our correspondent revealed that some of these big stockbroking firms had sold off huge portion of shares in the market, contributing significantly to the N517tn decline.

The Managing Director of a stockbroking firm, who asked not to be named, told our correspondent that the sell-offs had actually been as a result of panic by foreign investors as regards the ongoing crisis in North-Africa and the Middle East.

He said, “At first, we realised that these stockbrokers were selling off huge amounts of their shares for unclear reasons at that time. But now, we have come to understand that it was actually foreign hedge funds that were being sold on instruction from foreign clients.”

Confirming the development to our correspondent, the Chief Executive Officer, Lambeth Trust and Investment Limited, Mr. David Adonri, noted that the political crisis in the Arab world had caused some panic among the foreign investors, adding that the recent comments on the International Monetary Fund on the naira might have also led to the mass exit from the market.

“These foreign investors see Africa as a continent, and so, they may be afraid that Nigeria may be affected by the crisis in one way or the other,” he said.

The Managing Director, Compass Securities Limited, Mr. Emeka Madubuike, said, “It is true that there has been some heavy selling in the market and the reason may not be unconnected with the uncertainty in the economy.”

Source: Punch