Stories by Amaka Ifeakandu
The Nigerian Stock Exchange (NSE) has said that the recent rebasing of the nation’s Gross Domestic Products (GDP), by the federal government has impacted negatively on the contribution of the NSE’s market capitalization to the GDP.
Chief executive officer of the NSE, Oscar Onyema, who spoke in Lagos at the second quarter capital market committee (CMC) meeting, said that following the rebasing, the market capitalization to GDP ratio has declined below 20%.
He said that the figure shows the importance of getting more investors to participate in the market, as well as getting more companies to list on the Exchange.
“The market capitalization to the GDP ratio before the rebating was low and with the rebasing, it has even become worst, I think it has gone down to 16 to 20%.
“This highlights the fact that we need to get more people involved; we need to bring more companies to list in the market to raise the market capitalization to GDP ratio significantly,” he stated.
He said that initially, NSE thought that agriculture made up about 40% of the GDP and we highlighted four industry categories that we wanted to focus on, but after the debasing, we have since realized that we need to go back and look at the sectors that make up the GDP now and refocus our energy on those sectors.
On the encouragement of retail investors’ participation in the capital market, he said, “It is true that a lot of retail investors got their fingers burnt during the market crash of 2008, but we believe that given the rebound we have seen in the market, it presents a good opportunity for entry point to people.
“However, the way they come in and the way they access the market is completely different and people really need to understand that the market has an inherent risk and we have to find way to manage the risk.”
Speaking further, he said, “for retail investors that do not understand how the market works, I will advise them to seek the advice of professionals or use the collective investment schemes because you don’t put money on the table and look away. You have to continue to do either fundamental analysis or technical analysis and do stock taking. If you are a retail investor, it is not advisable; because you don’t have the right fiber to do that.”
He also called for creation of more awareness, especially for retail investors, saying “there is financial literacy sub-committee of SEC that is taking the lead in making sure that we properly educate investors, policy makers and other stakeholders on the major characteristics of the market and how they operate generally.
