2016 is just 20 days gone, and with the Nigerian stock exchange having lost over N2 trillion Naira already; the mind can only begin to imagine how bad the year is going to be. On the larger context though, Nigeria isn’t alone in its woes, with China’s stock markets also experiencing a free-fall during the first week of trading in 2016. It can not be ignored that the Chinese regulators erred greatly in recent regulations, a fact that can also be said of Nigerian regulators and their own faulty regulations. The Chinese regulators installed market-wide circuit breakers into their stock markets (Something the NSE has just recently done). The way a circuit breaker works is that it shuts down and closes the trading day if the market is down by a specific percent. Installing circuit breakers into the Chinese markets was a big mistake, as it instills a wide sense of panic in an already fragile market.







Sure, we use circuit breakers in the New York Stock Exchange, but that’s also controversial. In China, its stock markets already use daily price limits (in China, individual stock prices cannot fall by more than 10% per day), and its marginal investors seem to be the uninformed, speculative, individual investors (a marginal investor is the one that has the power to affect market prices). So, the imposition of circuit breakers was not only repetitive to its price limit system, but it also only served to incite panic rather than to reduce it.



The question to ask now, is if there is already a sense of uncertainty in the Nigerian market? From issues of insurgencies, to FX restrictions and even to over-regulation of sectors, Nigeria is looking less like the attractive destination it once was. The over N1 trillion slump on the NSE from last week looked like a protest sell off investors, who were sending a clear message to the Nigerian government that they didn’t believe the recent reforms were working.



With crude oil falling below $30/barrel and the realization that Nigerian oil fields could begin to shut down should the slide persist. These realities point to a fact that government revenues, in the face of a N6 trillion budget looks very threatened. Analysts had hoped that this budget would stimulate the economy, but with the fiscal deficits widening, the prospects look bleak.



The core challenge is on how to restore investor confidence, in a scenario where it appears that the government doesn’t particularly believe in the success of business enterprise. Now, it may say otherwise, but actions, they say, speaks louder. With FX restrictions that have greatly hurt local and foreign investors, coupled with unrealistic fines and sanctions handed out to the likes of Stanbic IBTC, MTN and Guinness; the message seems clear. Who wants to then invest in an economy where your access to FX to buy raw materials for your production is hampered, or where the government goes to court to try to stop your “guaranteed” repatriation of funds?




The Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has however shifted the blame to the United States and Nigeria’s over reliance on foreign goods for the unrelenting depreciation in the value of the naira against other major foreign currencies; and puts this out as a background backing for the banks instance on the new FX policies. He said this after a closed door session with the Nigeria senate; who had summoned him to give clarifications to the nations weakening currency. The Nigerian Senate, after the meeting said it was satisfied with the way the monetary authorities had been able to manage pressured naira in the face of prevailing tight global economic conditions.
Kunle Bello an economist said he believed that the government was on the right path, but was going way too fast. He said “ the reforms in themselves are not bad, but are things implemented in phases to meet with social expectations and economic changes. If I were the government, I would have spaced out the reforms to see that the effects aren’t lumped on Nigerians. Also, with job losses, government can’t be driving the stick hard on big employers of labor, it just doesn’t make sense.

Senior researcher at BTVA media also agreed with this and said “The business environment is lacklustre, desperately seeking for positive metrics to lift it. The CBN is compounding matters as its demand management is stifling an already challenged market”

Source: http://www.barbaric.com.ng/the-titanic-called-nigeria/