Indications have emerged that political activities ahead of the 2015 general elections are beginning to affect the capital market performance.
Experts in the Nigerian Stock Exchange, who spoke to SUNDAY PUNCH on Thursday, said some politicians that are key players in the daily market transactions might have begun to hoard funds in preparation for electioneering.
Others are said to be selling off their shares in some companies quoted on the NSE in a bid to store funds for their political project.
They said these were largely responsible for the phenomenal loss recorded in the capital market this year.
According to the experts, it is common for investors who are politicians to begin to amass funds at a time like this for political campaigns and other related matters.
This, they noted, had contributed considerably to the huge loss of over N780bn in the market capitalisation at the end of the first quarter that ended in March.
They also said the loss recorded in the first quarter was unusual, adding that the Exchange had not had such a massive decline after the global meltdown of 2008/2009.
The Managing Director, Crane Securities Limited, Mr. Mike Ezeh, who confirmed this in an interview with our correspondent, said it was customary for politicians to sell off major part of their investment in a pre-election year.
He said, “The loss by the market in the first quarter of 2014 has been phenomenal to say the least. Of course, the upcoming 2015 elections has played a huge role in the losses recorded because politicians are already storing funds that they are going to use to prosecute their campaigns.
“You will notice that a good number of them are selling their shares in readiness for the elections, but that is only one leg of the issue.
“The other leg is that investors who are apprehensive and not sure of the outcome of the 2015 elections are also selling off their shares, because they are not certain of stability in the polity after the elections. They may be afraid that any kind of instability may possibly affect the economy and cause uncertainty in the country which could in turn lead to crashing in the prices of their investments.”
The Chief Executive Officer, Proshare Nigeria Limited, Mr. Olufemi Awoyemi, also said many reasons could account for the huge losses recorded in the market since the beginning of the year, including the upcoming elections.
He added that since the market was largely information-driven, any little agitation in the economy could lead to investors dropping their shares.
“We cannot completely write off the possibility of the impact of the 2015 elections in the huge sell-down witnessed during the first quarter 2014,” he said.
He, however, added that the huge sell might be due to the significant uptick in speculative tendency as suggested by sentiments analysis.
“Between October 2013 and mid-January 2014, huge money chased penny stocks which further confirmed the speculative trading, and by the nature of penny stocks, they are not type of stocks you can buy and go to sleep, they are really meant for speculative trading in Nigerian market,” he stated.
Similarly, the Chief Executive Officer, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo, said, “This has been the worst first quarter the market has witnessed in a long time. The closest we got to the present situation was in 2008 and 2009 when there was serious market meltdown, and those were unusual times.”
According to Fakayejo, the first quarter is usually a period when there are a lot of expectations concerning the annual audited reports of listed companies and corporate actions.
“But this year, even as good as the audited results were, the heat that came upon the market was much,” he said.