EmogInspiration

The rumored CBN regulation which restricts margin lending
by banks seems to have resulted in a chain reaction between
the local capital market regulators,  brokers and the CBN.
Each party trading blames as to the cause of the downturn in
the market. Some believe that these are indicators that the
Nigerian stock market is relatively underdeveloped and not
properly regulated.

The NSE has been growing on an average compound rate of
46% over the past 5 years. This results over the years makes
the NSE one of the best performing equity markets in the world.
However, the recent trend in the market which has been bearish
saw stocks loosing almost all the profit that they have made for
the year.

The NSE is posting a negative return of -0.3% for 2008. This is
a direct opposite of what we have in the economy. Oil prices are
well over $130 per barrel and foreign reserves likely to hit
$100 billion by the end of the year. In spite of all this, why should
a negative return be posted by the NSE?

Local brokers have blamed the CBN for restricting margin lending
and attributed this to the cause of the downward trend in the market.
However the CBN Governor on the 10th of June said that the CBN
have given no such order. This put the local banks in the spot light.
It could be that the banks are only trying to protect their interest
and manage their risk.

There is also the possibility of a change in the management of the NSE.
The CEO of the NSE is a close associate of the former President and
was closely related to the controversial Transcorp amongst others. The
present administration might want to reform the NSE as well.

It is hoped that in the weeks ahead, after these issues have been
sorted out, the market will go back to normal and exceed its earlier
figures.