Security Challenges Weaken Stock Market

Globally, investors are faced with the task of taking investments decisions that would not only bring about business growth and development,  but also contribute toward the economy of any nation where they have investment holdings.

However,  security is a key risk factor which raises concern of  both local and foreign investors , as security uncertainty is not only considered an impediments  for business, it sends warning signals to investors to take their investible fund to another country where there is safety of lives and property.

The impact of the sectarian violence in some parts of the country and the ripple effects of the economic crises in Europe have helped to sustain the depression in the Nigerian Capital Market. These events are capable of reversing the gains the economy at large has recorded, including current growth rate of 7.4 per cent and operators are apprehensive that if the spate of violence is not tackled frontally, the projection of the Nigerian Stock Exchange to grow market capitalisation in 2016 to $1trillion (N150 trillion) might be a mirage.

This is because when people feel insecure, their appetite to invest, to buy or rent reduces and that is why all over the world, any country that radiates an environment of insecurity naturally repels investment initiatives from the international community as well as from their own local investors.

Investment analysts have continued to caution that the impact of the continued sectarian violence, political instability and the ripple effects of Eurozone economic crises had brought the Nigerian Capital Market and investors' confidence to their lowest status in recent years.

They said the country was currently facing a high level of capital flight, and declining interest of foreign investors in the economy.

According to the Chief Executive Officer of the Nigerian Stock Exchange, Mr. Oscar Onyema, the Eurozone crisis and other uncertainties in the economy occasioned by the unrest in some parts of the country also accounted for the huge withdrawals.

He noted that while a total of N479 billion came into the capital market via foreign investments in the year under consideration, N313 billion represented the amount that left the market.

“Foreign investors were faced with a number of challenges from their own countries, and the Eurozone, a factor which led to the huge outflow of foreign portfolio investment and a consequent decline in the value of transactions in the capital market. Of course, we also had our own local challenges. The Eurozone credit crisis remains a key risk to the world economy in 2012, with increased concerns surrounding the sustainability of sovereign debt instruments, especially with the unrest and volatility in certain regions of the world economy.

“We continue to watch it closely and it raises concerns about sovereign debt sustainability. If you add  that to what is going on locally; unrest and volatility in some regions of the country, these present concerns for us in the capital market, “he said