Business

‘Low valuation boosts Nigerian capital market’

Mr. Olusola Oni, a Chartered Stockbroker and Managing Director, Sofunix Investment and Communications Limited, has identified low valuation of stocks quoted on the Nigerian stock market as one of the major reasons investors are attracted to the nation’s bourse. Oni, who stated this in an interview to mark his 60th birthday, noted that the global financial crisis of 2007 and 2008 took toll on the exchange like any other market and full recovery has not been achieved on our market.

“The market has experienced several rounds of volatility. It is part of every market dynamics. Foreign investors always bring their hot money to our market because of its potential for high return on investment (RoI).

“Valuation on our market is relatively low and this makes the market attractive. But uncertainties at the level of polity, economy and security have consistently dampened investor confidence and discouraged private equity from participating effectively on the market. “COVID-19 and its associated challenges in all spheres of human activities have not helped matters.

However, if the government gets its bearings in turning around the economy and managing other layers of uncertainties, the market will rebound steadily,” he said. Oni noted that the demutualisation of the exchange, which is in the process of completion, would enhance market viability.

“It is commendable that the cur-rent management of the exchange continues with the lofty project which commenced during our administration. “Most members of World Federation of Exchanges (WFE) have either demutualised or at the advanced stage of demutualisation. It will change the exchange’s governance and processes. Status of Association of Securities Dealing Houses (ASHON) will change.

“We hope it will not create an oligopoly in the medium to long time. This is because the few dealing member firms with deep pocket can swallow others. But if the guidelines of Securities and Exchange Commission (SEC) on demutualisation is strictly adhered to, the firms that came on board at the formative years of the market will not all go into extinction. “All tiers of government should take advantage of the capital market to access medium and long term fund for development projects.

It has been done severally in the past. The Federal Government recently raised over N200 billion from the market through Sukuk 1 and 11 to finance over 26 roads in the six geo-political regions.

Oni stated that the current three million retail investors and less than three per cent adult participation in the market in a country of about 200 million people is not heartwarming. “There has not been significant difference from where we left ten years ago. A lot more should be done to attract potential investors into the market. But it should not be the sole duty of the exchange and SEC. The entire market ecosystem should take it more seriously,” he said.

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