The Association of Securities Dealing Houses of Nigeria (ASHON) has urged the Federal Government to sustain its current policy on Open Market Operations (OMO) to enhance capital market attractiveness.
Its Chairman, Mr Oyinyechukwu Ezeagu, made the appeal in a statement made available on Monday in Lagos.
Ezeagu expressed worries over policy inconsistencies, saying that the new policy on OMO had been very beneficial to the stock market.He said that the fall in interest rate created opportunities for higher Return On Equity (ROE) and the investors were taking advantage of the inverse relationship between the money market and capital market.
The chairman said this against the backdrop of the All Share Index (ASI) which had a measure of corporate gains increased by 37.55 absolute points on the Nigerian Stock Exchange over the weekend, representing a growth of 0.13 per cent to close at 29,628.84 points.
Also, the market capitalisation, value of listed securities, was up by N19.34 billion, a growth of 0.13 per cent to hit 15.26 trillion.
Generally, investors have been smiling to their banks as the market has largely been on a bullish run since the beginning of the January.
According to Ezeagu, the apex bank recently announced the exclusion of non-bank locals (individuals and corporate) from participation in OMO at both the primary and secondary markets, implying that only Deposit Money Banks (DMBs) and Foreign Portfolio Investors can participate in the juicy financial instruments.
Ezeagu said that the new policy which crashed interest rate on treasury bills and trimmed yields on bond had prompted investors and fund managers to shift focus from the money market, staged a comeback to the capital with massive demand for shares in an atmosphere of Santa Claus rally.
He, however, expressed concerns on sustainability of OMO policy going by uncertainties that usually characterised government’s policies in Nigeria.
The chairman said that the Federal Government could reverse the current OMO policy if banks mounted pressure that it was hurting their profit margin.
Ezeagu said: “Our concern is always policy uncertainty and consistency in Nigeria. This has been a major drag to the growth and development of the economy and by implication, the capital market.
”The new policy on OMO is making investment in the market more attractive, but the question is sustainability. We operate in an unpredictable environment where there can be policy somersault at the least expected time.
“The OMO policy did not come from the blues. It is part of CBN’s financial engineering tactics to ensure that Deposit Money Banks channel credit to the real sector to reduce crowding-out of the private sector in the area of credit.
“Banks should lend money to the real sector to enhance economic growth and development. Banks are currently awash with liquidity and this should be channeled to the real sector,’’ Ezeagu said.
Some market watchers corroborated Ezeagu’s worry that the devaluation of the naira was still on the front burner in view of the current rising inflation rate in Nigeria.
According to the statement, the Central Bank Governor, Mr Godwin Emefiele, had last year openly denied plans to devalue the naira, but tactically maintained that this could be an option if the crude oil dropped between $50 and $45 per barrel.
The naira rate is currently at $58.58 as at Monday morning.
The technocrat also said that naira devaluation might be the last option if the external reserve should shrink below $30 billion and $25 billion .
It was $38,684 billion as at last month.
