No body goes out with the intent to crash a market!!! but when the regulatory body seem not to read the lines when a bubble is brewing then sure they have the share of the blame!
we all knw that stock prices continually skyrocketed and as many nigerians believe, stocks prices can only go up and not down, the crash became impeding
But I wouldnt realy blame the naive investors cos even the banks believed that stocks can only go up if not why would a bank give a loan to someone while the same share certificate serves as a collateral!!!!. the bank's risk management system didnt ever factor in that the collateral might be worthless if the share prices went down as it now.
NOW they have lots of non perfroming/.Bad loans and they are still doctoring all these losess, again where are teh regulators??I have not seem any bank come out and say we lost this amount on the NSE crash no body is disclosing ianything,the only thing we knw is that the CBN is saying the total expsosure of the Banks all together is about 900B naira thats about 4 times the money the three tiers of Governmnet shared in May 2009!
I smell troble somewhere I pray I am wrong!!!!
Babalawo nice one
A lot of things affected the NSE in the years under review. . .
We had a market just like you pointed out where the regulators were asleep. They were never up to speed as regards their responsibilities.
The nonexistent bullish runs we experienced were as a result of so much manipulations from the operators, regulators and traders alike.
We had a market that a single individual could affect the fortunes of a particular stock.
The awareness of the gains of investing in the NSE coincided with the capitaization of the banks which all the banks had to partake in to raise the needed 25billion to fund expansion. The buzz word then was private placements and IPO.
The excitement was so much that every privates and harry knew about the prospective gains of investing in stocks.
Initially, the upward movements were as a result of the fundmentals of the market and stocks. banks were being sold for between 5-10 and at that time, it was a good bargain judging from the outstanding shares and the results they were churning out and also thier forcasts.
The excitement grew out of hand and the awarenes moved to other sectors.
Then we had the mergers and acquisitions in the Oil and gas (downstream). The Oil moguls too started hitting the markets and the excitement at that time had reached a crescendo where if ure not an investor (either passive or active), then it looked like youre gonna have a bleak future
Guys like me made a kill of these opportunities. We had instances where PHB was bought for N9, and some other banks for less. Since then , these banks have given a lot of bonuses, dividends and of course, the inherent capital appreciation in most of the buys.
The smart investors with smart money had already cleaned out of the market and are only in the fundamentally good stocks like FBN, GTbank, AP, et al.
The excitement continued with the capitalization of the Insurance sector and at this point, the market was already getting saturated. I still remember guys cleaning out cos of the inefficiencies in the market. Bought Equity Assurance for 0.56k and sold for 3.8 in a record time. Can u imagine a stock gaining a maximum 5% for 2 weeks!!!!!!!!
When a company wants to hit the market to raise fresh funds, they do all sorts to push the price up arbitrarilly in order to be able to justify whatever price they will be coming out with. Guys like me with insider information will cash in on this and make 'gains'
Guys on the streets will jump on the train when the train is about coming to an abrupt end!
Guys lose out!! As a result of this and more, the confidence in the market started to wane gradually
Another factor is the ability of unprofitable and illegal coys to trade effectively on the NSE. We had cases of coys like Capital oil, Afro Oil trading on the stock market with no visibile accounts, offices and no signs of any commercial activities going on in the aforementioned companies. Interestingly, these coys were much more valuable on the market than some fundamentally tested companies. or how do you explain a coy like Afroil selling for about N15 without any audited accounts for 3 years!!
No visible trade lines, no visible business and they were selling far more than say Access Bank at that time
The sluggish regulator sudddenly wakes up to her responsibilities after millions of Nigerians have jumped on the moving train once again!! They jumped on the Afroil train because a week will not pass without these coys posting impressive bullish runs.
However, the irregularities in these coys were discovered and the regulators without prior warnings decided to freeze all activities in these quoted companies with plenty millions of Naira from the unsuspecting public in frozen
yet again, the investor confidence in an emerging stock market continues to wane!!!!!!
Apparently, we had a lot of foreign investors that had come to dump thier billions in our market as a way of improving on the lean margins they were used to in the developed countries. The NSE then was posting impressive returns and it will be foolhardy for any smart investor not to come and invest in Nigeria. These stupidly smart investors came into the country through our banks and horay, we had too much funds within the banking system.
Our banks yet happy again to have access to huge funds started Retail banking at the speed of light. Awash with cash, the bullish runs on the NSE; the banks devised so many credit systems that found their way to the stockmarket floor of the NSE.
Margin lines were created by these banks to lend to customers to trade/invest short and long term.
Nobody envisaged any problems and alas, their came the subprime problems in the US, the financial crisis that culminated in the meltdown in the west!
At a point, we thought the Nigerian market was insulated to the happenings in the developed economies but it wasnt long enough that the bubble started bursting even in Nigeria.
The foreign banks that came with so much money had to run to Nigeria to take out their funds and hence the fatal stockmarket crash in nigeria.
It was so fatal that some companies that were valued at more than N20 now go for less than N2.
Its unfortunate that with the colossal loss of capital that had taken place, some of our banks are still posting very impressive results
one begin to wonder where all the money they lost to the margin accounts, the credit cards and the direct investment they did on the NSE are not affecting thier results?
For those that have chosen to learn from the NSE imbroglio, it is high time we started making informed decisions as to what and where to invest and where to keep your money.
Do not be deceived that some of our banks cant go under. Wachovia and L.Brothers have gone under and they were bigger than our banks all together.
This is not trying to be a naysayer but just wondering aloud why we have so much prosperity in the banks even in the face of what had happened to their hard earned funds in the NSE
I hope the CBN is not following the footsteps of the SEC and NSE
The CBN should be up and doing to save the Nation from any impending banking crisis.
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