By UDEME EKWERE

Before 2009, the Nigerian capital market was the toast of local and foreign investors. However, despite its recovery and steady appreciation in share value, investors are becoming increasingly cautious about putting their resources in the market again, UDEME EKWERE writes.

Investors in the Nigerian capital market appear to have found wisdom in the maxim, “Once beaten, twice shy,” by being more circumspect with their investment decisions.

Still smarting from the losses they recorded when the market was thrown into turmoil three years ago, the investors are now wary of staking their funds on the millions of seemingly low-priced shares currently available in the market.

Investors, who spoke in separate interviews with our correspondent on Friday, said that they lost a lot of funds in the wake of the global economic meltdown, which affected the Nigerian stock market in 2008, and also the banking crisis that followed in August 2009.

Even when other economies began to recover from the free-fall of shares, the Nigerian Stock Exchange continued on the downward trend with the market capitalisation of the listed equities, which stood at N12.395tn as at March 2008, suffering its highest fall in the 48-year history of the NSE. It lost over N5tn or 45 per cent of its value to close at N6.8tn at the end of the year.

The NSE’s All-Share Index also suffered a similar fate, falling by 51 per cent from 63,016.60 in January 2008, to 31,450.78 at the end of the year.

This was despite the efforts of both the Federal Government and the regulators of the Nigerian financial system to restore investor confidence in the market.

Despite the Central Bank of Nigeria’s reforms in the banking sector, the market did not fare any better, as investors continued dumping their banking shares, especially those of rescued banks.

This led to a further decline in market value that year, with the market capitalisation of listed equities closing the year at N4.989tn and the NSE All-Share Index closing at 20,838.90.

Activities subsequently dropped to a low level, before they began to pick up on the news of the purchase of the toxic assets of banks by the Asset Management Corporation of Nigeria.

By the end of 2010, the NSE’s All-Share Index had increased by 18.5 per cent from 20,827.17 points at the beginning of the year, to close at 27,770.52; while the market capitalisation of the 201 first tier equities rose to N7.91tn from the N4.99tn.

The appreciation continued into 2011, but for the losses that began at the end of January, which investors traced to the crises in the Middle East and some North African countries, as well as the general elections in the country.

All these led to a drop of over N800bn in the market capitalisation so far this year, thus leading to huge declines in the share prices of major stocks across almost all the sectors in the capital market.

However, wary investors say they are not moved by the low prices of shares in the market, adding that the losses they recorded in the past few years have taught them to be extremely cautious with investments.

An investment analyst, Mr. Seye Adetunmbi, said that investors’ appetite in the market could be traced to the lack of investor confidence was a major issue that should not be taken for granted, adding that the market might also not have been deepened enough to attract investors.

He said, “If prices of shares are low and investors seem not to be taking position, then it could be that there are competing investment windows that could be attracting their attention outside the market.

“Also, the lack of sufficient confidence in the market is another key issue, and also the fact that there are no overflowing funds out there for long-term investment in securities or quoted stocks.”

The National Coordinator, Shareholders Renaissance Association of Nigeria, Mr. Olufemi Timothy, noted that there was illiquidity in the system, which had not encouraged investors in the Nigerian market.

He noted that even though prices of some shares were at their year-low at this time, the uncertainties surrounding the elections were enough reason for shareholders to hang onto their funds rather than invest in the market.

An investor, who spoke on the condition of anonymity because of the sensitive nature of the issue, said that before the crisis started in the capital market, his investment there was worth N50m, but that at the end of the day, it came down to just about N11m.

A shareholder, Mr. Jack Shonubi, said that nothing would make him bring fresh funds into the market at the moment.

Shonubi, whose portfolio is being managed by an investment house, said that even if the shares of some major companies fell to below 50 kobo per share, he would not stake any extra fund in the market.

He said, “I have seen something in the market. Sometimes, I am even ashamed of saying the amount of money that I have lost in the market. The truth is that as at 2008, my worth in the market stood at about N2.5m because I was an avid investor and I bought into almost all the banks that had Initial Public Offers at the time. So, when the bang came, it was overwhelming for me.

“During the peak of the crisis, I managed to sell out about N200,000 worth of one of the banks’ shares, which I invested in others. But before I knew it, my portfolio was down to just above N1.2m. Right now, it is hovering between N1.3m and N1.4m. It is rather amazing.”

Mrs. Olabisi Shotunbi of the Universal Shareholders Association of Nigeria said that, having lost over N800,000 in the market, she had decided that any extra funds she had would be saved in fixed deposit accounts in selected banks.

She said, “My husband is a banker, and he has knowledge of calculating the interest rates of banks. So, he has been advising me these past months on which banks are giving good rates, and that is what I have been following.

I think it is far better to just leave my extra funds in the banks and be sure that at least they will be safe there, than to run around in the market where the funds will lose value anytime and anyhow.”

A stockbroker, who refused to be quoted because of the sensitive nature of the subject, said that he was also unsure of the market at this time and that he had instead developed some interest in real estate.

He said, “I know it is strange to hear a broker saying that he is afraid of putting his funds in the market, but that is the truth. I, like a lot of other stockbrokers, had my fingers seriously burnt in the market, especially with the margin loan issue; and since then, my safest bet has been to buy land and sell at a profit. I think that is working better for me.”

Source: Punch