The Truth Behind the Stock Market Crash In Nigeria

The crash of the stock market in Nigeria came as an utter surprise for many. The main casualties of the crash were veteran investors; fathers, mothers and retirees who formed a greater percentage of the fatefuls in Nigerian equities. Overnight, over 70% was wiped out of the value of most shares traded in the Nigerian stock exchange. Top on the casualty list of dissappointing shares were bank equities; banking giants like Zenith, Bank PHB, UBA and First Bank witnessed a downward slide in their market value.

Amidst the massive outcry from the citizenry, many of whom have seen their pensions diminish rapidly, there is little hint at the core of this avoidable problem. What are the Stock exchange itself? Was it managed appropriately? The excuse that is being propagated by some that our exchange is solely dependent on adverse m ovements in international markets and exchanges is completely insufficient. If a finger of blame is to be pointed, then it should be pointed at the guardians of the stock exchange. A failure of stock exchange internal policies was largely responsible for the abnormal and untimely demise of our once fledging stock exchange. The policy of excessive and unmonitored floatation of shares of companies by the Nigerian Stock Exchange (NSE) prior to the crash is inexcusable. Simple economic laws like the law of demand and supply were ignored by the top echelons of the NSE at its own peril. Of course in a scenario were you had most of the Nigerian banks issuing IPOs with reckless abandon was bound to come to its head soon. What we had in the lead up to the eventual crash was a situation of excess supply of various equities. According to the simple laws of economics, the more the quantity, the lower the price.

Those responsible for overseeing the affairs of the NSE displayed an utter lack of professionalism and lack of technical knowledge in the manner in which they certified and approved frequent floatation of shares to the unsuspecting investing community in Nigeria. Again, another scenario played out by this scenario was the prevalence of a undervalued shares in the market. The Securities and Exchange Commission also has a role to play in the crash. Where was the SEC when these transactions were being passed by the NSE. Was it a lack of oversight by appropriate regulatory bodies?

To Be Continued.........