Nigeria Content Online

The
continued delay in the takeoff of the Asset Management Corporation of
Nigeria (AMCON) is already taking a toll on the financial markets.
Since the signing of the AMCON Bill into law by President Goodluck
Jonathan on 19 July, the regulators concerned have been working to set
it running.

AMCON
was expected to stimulate the recovery of Nigeria’s financial system
from its recent crisis by boosting the liquidity of troubled banks
through buying their non-performing loans, helping their
recapitalisation, and increasing access to restructuring or refinancing
opportunities for borrowers. The Central Bank proposed its formation in
December 2009 as part of moves to revive the banking industry and
strengthen the financial market.

Analysts’ anxiety

However,
the uncertainty over its form and structure has continued to generate
anxiety among operators. Analysts at Afrinvest, a firm of investment
bankers, said the effect was evident in the bond market.

“PDMMs
(Primary Dealers and Market Makers) who usually take long term position
at the beginning of the month, have instead been selling off
securities. This may be related to the slow start in AMCON operations.”
According to the report, average yields for the three year, five year,
seven year, 10 year and 20 year bonds had dropped to 6.7 per cent, 6.9
per cent, 5.8 per cent, 7.5 per cent and 9.3 per cent respectively at
the end of a fortnight by 6 August.

Apart
from AMCON’s absence, other operators said recent developments in the
capital market have created uncertainties about the market’s direction.
Only last week, the Securities and Exchange Commission (SEC) intervened
in the stock market by sacking the director general of the Nigerian
Stock Exchange (NSE), Ndi Okereke-Onyiuke, and the council president,
Aliko Dangote. Since then, the market has been on a downward slide
though SEC immediately appointed Emmanuel Ikhazobor as the interim
administrator of the stock exchange.

Volume drivers

Joshua
Omo-Kehinde, managing director of Marimpex Finance, a stockbroking
firm, said the major problem with the stock market was beyond the issue
of who heads the stock exchange. Mr Omo-Kehinde said there was need to
stimulate demand and supply of equities by having institutions that
would be capable of driving volume in the market.

“It
does not matter whether they are appointed or unofficial, what this
market needs at this time are market makers that would be able to buy
huge volume of shares when available and sell huge volumes when there
is demand.” Another stockbroker, Davis Adonri, the managing director of
Lambeth Investment and Securities Limited, said it was difficult to say
precisely what was responsible for the market slowing down.

Mr. Adonri said that despite the good results declared by Guaranty
Trust bank and National Salt Company, shares of both companies were not
generating the kind of patronage that is expected. He said some
extraneous factors were responsible for the market lull, adding that
the liquidity position was a factor to consider. “It has almost become
a trend now that at the beginning of the month, the market slows down
and picks up once the FAAC allocation (Federation Accounts Allocation
Committee) starts to come in.”