‘Recapitalisation will make the sectors stronger’

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The Nigerian equities market in the past few months has enjoyed positive sentiments, rallying to hit 15-year high amidst policy reforms. In this interview with KEHINDE AKINSEINDE-JAYEOBA, Aruna Kebira, the MD/CEO, GlobalView Capital Limited, speaks on the possible effect of the naira free float policy, among others.

The Nigerian stock market made a feat in June as the All Share Index crossed the 60,000 basis points mark as against some global stock markets that projected losses in the month of June. What are the factors responsible?

The stock market is an information-driven market. The movement back and forth of prices in the capital market is premised on the quality of information at the marketplace as per time.

The government of President Muhammadu Buhari was accused of so many misgivings of ineptitude, grand corruption and ineffective management of the economy, most especially the forex exchange sector, and their attendance consequences hampered the stock market.

Recall that the multiple forex exchange rates and the non-availability of forex led to the flight of FDIs from the stock market.

The appearance of the three key aspirants for the LP, PDP, and APC was a pointer of hope to an average Nigerian. Even the international community analysed that if peradventure any of the party front runners happened to become the incumbent, the economy would be better run than the previous.

On May 29, 2023, President Bola Tinubu was sworn into government and he began to unfold his agenda for the country. Beginning with a proclamation of the removal of fuel subsidy that has been considered as an unnecessary conduit pipe from which the country’s income has been siphoned uncontrollably.

This, the market responded to positively on May 30, 2023, seeing the market closing with a daily gain in excess of five percent. Most prices attained their new 52-week high prices.

As the frenzy was getting waned at the market arena, the news of the suspension and arrest of the erstwhile CBN governor, Mr Godwin Emiefele, filtered into the market and was greeted with much pomp and pageantry and the market responded positively to the news and the market rallied for a straight one-week, climaxing into the prices of stocks, setting new 52- week high prices.

As we speak, the market has seen that President Tinubu has not drawn a bad card yet and the market is set and ready to continue to set new 52-week high prices both at the individual stocks level and at the ASI and the market capitalisation levels, leading to a new admittance of Guaranty Trust Holding Company (GTCO) into the class of the SWOOT – stocks worth over one trillion naira

With the free float of the naira, recapitalisation seems inevitable. How will this affect the equities pricing?

We have seen the outcome and effect of the 2004 recapitalisation exercise of the banks driven by Professor Chukwuma Soludo and the positive effects on the bank’s balance sheets.

Yes, it may cause some banks to end their journeys at that juncture but it has made most banks strong and up and doing.

If there is any recapitalisation drive by the relevant regulatory body in the country, it will only help to make those sectors strong. The recapitalisation of 2004 was what led to the boom in the stock market between 2006 and 2008.

I foresee a positive effect of it in the capital market as those that would survive the exercise would come out stronger.

It is believed that companies listed in the NGX are underpriced. What measures can be put into place to increase the value?

We know that as the naira continues to depreciate against other foreign currencies, the prices of stocks on the floor of the NGX would be seen to be underpriced.

But the underpricing I am familiar with is when a stock trades below its intrinsic value. If that is the standard, I don’t think that it is all the stocks on the NGX that are underpriced.

Yes, at one particular point or the other the price of a stock would be determined to be underpriced based on the statistics available and relating to such a stock.

One of the determinants of the price of stock is performance and quality earnings. The market would always move to reward a performing stock and as the stocks on the floor of the exchange begin to perform and the quality of information available at the marketplace is positive, the market would move to reprice every stock

With the new administration of President Bola Tinubu, investors seem excited about the monetary policies, so far. Can the present fiscal policies sustain this renewed confidence?

Government policies are not like light bulb switches that you just press and the light would come on the tail end. The beautiful thing about economic policies is that they have double multiplier effects. It will come to solve a situation and in turn, create another.

As the monetary policies are being rolled out, the government will monitor, evaluate and tinker with them for a better outcome.

What the populace is waiting for is the appointment of a substantive CBN governor and the Minister of Finance.These offices will help to buttress and drive the monetary policies.

President Tinubu has been known to go for technocrats and if that happens in this situation, I can assure you that the current tempo would be sustained.

SEC and NGX have put a lot of things in place for the listing of fintech companies. How receptive are these listing rules and what are the things that need to be done to make it attractive for the fintech to list on the NGX?

The two regulators have sets of rules and regulations. It is the duties of the intending companies to list that would of necessity adjust their operations and modus operandi to align with the rules.

The two regulators don’t have to begin to bend their rules for the fintechs as a form of attraction but it is the fintechs that has to modify their operations in line with the listing rules and requirements of the capital market.

The capital market is supposed to be a level playing field for all and the coming of fintechs should not be seen as changing the rules of the game.

What they have put in place to attract fintechs should be sufficient as incentives and as motivators to attract them into the capital marketplace.

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