Naira scarcity threatens to erode investor confidence in capital markets

Some market operators have called on the federal government to urgently address the issue before it completely erodes inventors’ confidence in the financial market.

The Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, said the currency of the financial market is confidence and trust and anything that shakes the confidence and trust of the public will affect the financial market.

Amolegbe noted that while the cash swap policy is good, its implementation hasn’t been satisfactory. He said:

“If investors are not willing to take a risk by investing in the market, it will impact negatively on the market, just as we have seen foreign investors depart from the market because they couldn’t get their money in dollars when they needed it.

“We could also see local investors shying away from the market due to the cash crisis. The authorities need to quickly arrest the situation before it erodes investors ‘confidence completely.”

On the operational side of the stockbroking, Amolegbe said the impact of cash swap will almost be zero because the industry has been cashless in the last two years.

He noted that if there is going to be any impact on the industry, it will be on the part of investors reducing their exposure due to a lack of confidence in the financial system.

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In the same vein, the President of the New Dimension Shareholders Association, Mr. Patrick

Ajudua said the market has since embraced the use of technology and stockbroking transactions by cash has been limited to a maximum of N50,000 for a long time.

He added that issuing mandates has been done electronically while payment for sales has been through bank transfers.

“Since from the point of giving mandates through to receiving payment of sales have not required investors to physically visit stockbroking firms, I do not see how this will affect the market.

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The Chairman of Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said the scarcity of cash is impacting negatively on the financial system especially the investors and listed companies.

Okezie noted that investors who executed contracts are finding it difficult to get contract fees paid and invest part of it in the market due to scarcity of cash and constant network failures.

“For instance, if I place an order to my broker for shares purchase, the broker can only buy the shares if my money hits his account, if there are network issues, it has affected my movement to buy equity. Because the network services are failing the broker won’t buy the shares,” he said.