Relief as Stock Market Begins Recovery, Gains N71bn

The capital market heaved a sigh of relief  Thursday as equities began to recover after losing a total of N339 billion in three days, following negative reactions to the nationalisation of Afribank Nigeria Plc, Bank PHB Plc and Spring Bank Plc by the Central Bank of Nigeria (CBN).

The market, which has not recorded any growth since the beginning of August, rose by 0.24 per cent or N17 billion yesterday as 27 stocks appreciated in value, against 14 that lost. Specifically, the Nigerian Stock Exchange (NSE) All-Share Index rose from 22,335.75 the previous day to close at 22,390.45 yesterday, while market capitalisation grew from N7.145 trillion to N7.162 trillion.

Although the N17 billion recovery was only about five per cent of the N339 billion lost three days earlier, market operators said the upward trend was a positive development for the market, signposting a gradual return of investors’ confidence. More bank stocks attracted patronage as 11 of them recorded price gains, compared with only five bank equities that appreciated the previous day.

Reacting to the positive development, President of Chartered Institute of Stockbrokers (CIS), Mr. Mike Itegboje, said the development had vindicated the position of the stockbrokers who had posited that the dumping of shares that greeted the nationalisation of the three banks would not last for a long time.

“I said it before that it (dumping of shares) is only going to be a matter of time. Once people realise the long term positive effects the Central Bank of Nigeria (CBN)’s action would have on the economy, investors would change their attitude. That is exactly what has begun to happen,” he said.

According to him, the collapse of a bank has more devastating effect on the economy than what most people can imagine. “When talking about the nationalisation, people are only concerned about the investors.

But if those banks were allowed to collapse, its impact would have been worse because you will be talking of investors, depositors and other stakeholders. Also, the depositors will include corporate bodies that have links with other financial institutions and major sectors of the economy. With the CBN’s action, there is hope that the banks are now safe and all stakeholders would be the better for it,” Itegboje said.

The Chief Executive Officer of NSE, Mr. Oscar Onyema, had last Wednesday appealed to investors not to be disillusioned about the current downward trend in the stock market.

He had assured them that the management of the NSE would not renege on its duty of protecting their interest in the market.

According to him, the actions taken by the CBN, Nigerian Deposit Insurance Corporation (NDIC) and the Asset Management Corporation of Nigeria (AMCON) should end the banking crisis and help stabilise the Nigerian financial market in due course. 

By the close of trading yesterday, shares of Diamond Bank Plc closed five per cent higher, while those of Guaranty Trust Bank Plc and Zenith Bank Plc went up by 4.9 per cent apiece. Shares of Sterling Bank Plc and Ecobank Nigeria Plc rose by 4.4 per cent each, just as United Bank for Africa (UBA) Plc, Fidelity Bank Plc, First City Monument Bank Plc, Skye Bank Plc and First Bank of Nigeria Plc appreciated by 3.4 per cent, 2.9 per cent, 2.5 per cent, 2.4 per cent and 1.9 per cent respectively.