The Lagos Chamber of Commerce and Industry has expressed deep concern over the downward trend in the Nigerian stock market (NSE).
The Chamber noted with surprise that the trend is showing no sign of abating any time soon as the market capitalization has continued to tumble.
Chief Nike Akande, President of the LCCI at a press conference in Lagos pointed out that as at 18th March, 2016, the NSE All-Share Index and Market Capitalization depreciated by 1.13% at 25,694.79 and N8.839 trillion, respectively.
Akande noted however, that investors and market stakeholders are hopeful of an improvement in market situation as the economic and policy thrust of the new administration becomes clearer.
The stock market performance is largely a reflection of the sentiments of investors in the larger economy, she observed, adding, “As the fundamentals of the economy improve, and the policy environment gets better, the stock market would rebound.
Speaking generally on the economy, she cited statistics from the National Bureau of Statistics, which disclosed that Nigerian consumer price index (CPI) increased to 11.4 percent in February, 2016, the highest in three years.
This represents about 1.8 percent rise over the 9.6 percent inflation in January.
The increase was attributed to the increases across major segments, which make up the headline index (for instance, the Food sub-index increased by 11.3 per cent, up by 0.71 percentage points from rates recorded in January).
Meanwhile, the foreign exchange crisis remains the largest risk to the inflation outlook, she noted pointing that this is a huge cause for concern to industry players as patronage, turnover and profit margins outlooks become weaker.
According to Akande, The unusual combination of slowing growth and rising inflation present a difficult policy challenge.
On exchange rate, she said that the average naira exchange rate remained stable at the inter-bank segment of the foreign exchange market with a daily average of N196.99/US$ between January 25 and March 14, 2016.
“So far, the value of the naira has depreciated by 17.2 per cent at the CBN window from N165 to the dollar (which it was at the end of December 2014), to the current rate of N196.9.
However, the parallel market is still under pressure for the last couple of months even as the depreciation remains huge with the value of naira weakening by almost 100% at an average of N320/$ to date.
The recent sharp depreciation of the naira exchange rate in the parallel market is a cause for concern. It is a trend that should not be allowed to continue and all necessary steps need to be taken [and urgently too] to stem the slide and volatility. It is as much of an issue to consumers as it is to producers and other stakeholders that create value in the economy.
It calls for an urgent review of the current foreign exchange policy” she advised.