- Investors Jittery About Stock Market Crash ― Mobolurin
The Chairman of Capital Bancorp Plc, Mr Olutola Mobolurin, says local investors have developed aversion for the Nigerian stock market because of the 2008 market crash.
According to him, a lot of people have not recovered from the devastating losses they suffered as a result of the crash.
Mobolurin, while speaking during the 30th Anniversary and Annual General Meeting of Capital Bancorp in Lagos on Tuesday, said the low participation of domestic investors in the stock market was one of the reasons for the current bearish market performance.
He stated that the current decline in stock performance might not have to do with election jitters as being widely speculated.
He said, “The market has become too dependent on foreign investors. Our market is now being driven by foreign investors, which is bad. If we have enough domestic savings to counteract the foreign investors leaving, the market would have stabilised; but we do not have enough domestic investors.
“Since 2008, Nigerians have developed an aversion for the Nigerian stock market, as many of them have not recovered from their losses; it is almost impossible for them to come back and invest because people lost money. I understand some even committed suicide, while others had a stroke as a result of the shock.”
Mobolurin noted that the reason for the crash in 2008 was because the stock market was largely oversold and not properly sold.
According to him, stocks were sold to people believing that the market would never come down, which made people sell houses to buy shares.
He stated that brokers and bankers also introduced margin lending and sold shares to different categories of people, including market women, who knew nothing about investment, adding that people were not warned that should the market drop, they would lose.
According to him, because of that experience, a lot of Nigerians have stayed away from the stock market.
Mobolurin said, “We must ensure that we build back the confidence of people in the market. Operators and brokers must ensure that they sell to people in a rational manner. They must also consider their understanding and ability to take risks.
“The stock market is long-term, people should not put money in it and expect returns in three to six months. Nigerians should also develop local capital formation institutions; else, we will always be at the mercy of foreign investors.
“Interest rate is going up in the United States, which makes it more attractive to invest there. Portfolio investors are not dedicated to any country; they look for where money can be made; that is why they are all leaving the Nigerian market at the moment.”