By Udeme Ekwere

The market capitalisation of listed equities on the Nigerian Stock Exchange has dropped by N674bn or 7.6 per cent, from a peak of N8.885tn on January 25 this year to N8.211tn on Wednesday.

Analysts attributed the huge decline to massive withdrawal of funds from the market by politicians for campaign purposes and the North African/Middle East crisis.

Market activities have continued on a downward trend since January, with the NSE’s All-Share Index also decreasing by 2108.97 basis points or 7.6 per cent, from 27,797.39 in the period under review to 25,688.42 on Wednesday.

According to experts, who spoke in separate interviews with our correspondent on Wednesday, there is scarcity of funds in the market presently because foreign investors, “who account for about 68 per cent of volume in the market, are also moving out their funds because they are not sure of what the outcome of the April elections will be.”

The Managing Director, Proshare Nigeria, Mr. Olufemi Awoyemi, said apart from “other obvious factors,” politicians’ campaigns for the April elections had contributed significantly to the illiquidity problem in the Nigerian capital market.

“The general elections are here and that is a serious problem for the market. Politicians, at this time, will be withdrawing funds from the market to fund their various campaign activities. Again, some of them, who would ordinarily have put funds in the market are not doing so due to their various campaign activities. This is a very bad time for the economy,” he said.

Awoyemi added that many investors were also pulling out funds to pay children’s school fees, noting that the North African/Middle East political turmoil could also be affecting market activities.

The Chief Responsibility Officer, Value Investing Nigeria, Mr. Seye Adetunmbi, also agreed that electioneering activities by investors might have contributed to the huge decline in the market capitalisation.

“Though, I won’t totally blame the current fortune of the market on the election season in Nigeria, I can say that it may have some contributory effect. But remember that our market has its own fundamental challenges, with or without the election or the North Africa uprising. The market is still on a recovery course,” he said.

However, the Managing Director, Lambeth Trust and Investment Limited, Mr. David Adonri, said investors were also afraid of staking their funds on shares in anticipation of the outcome of the April elections.

He added that politicians would naturally be withdrawing funds from the market, rather than investing, to fund their campaigns.

Source: Punch