The Value crash in the Nigerian inventory current market has continued unabated considering that March 2008. In the early months of the rate crash, the media was awash with information on the cause for the downward pattern which was at that time excusable and endurable. Traders considered that the exit of overseas buyers from the market place although undesired at that time could not extend the bears reign. The media experienced adduced the reign of the bears to the exit of these investors.
Not Prolonged following when the bears refused to abate, the global soften down thanks to the disaster in the American financial sector was credited with the trigger of the reign of the bears. By August 2008, the brief restoration of the marketplace gave hope to traders that the nightmare was about. Buyers could recount that the fiscal crisis spared the Nigerian stock market place when the financial crisis started in 2007. That yr was the most exciting in the annals of the inventory industry with many difficulties so it was not challenging to hope rapid recovery of the industry since area buyers had been however intrigued in the market place.
That was a erroneous expectation. It will take further unforeseen price crash over and above primary price ranges of shares to expose the genuine domestic motive for the worst price tag crash in the historical past of the inventory marketplace. In January 2009 by itself for case in point, the sector shed a lot more than 3 trillion naira.
Growing discontent and public outrage led to the revelation of the real purpose for the unprecedented price tag crash by the Safety and Exchange Fee who accused the banking institutions of hiding their exposure to margin debts without the need of solid collateral. It was uncovered that stock broking corporations made use of shares as collateral. The banking institutions were explained to be owed much more than 388 billion naira margin debt by stock broking corporations who have discovered it hard to shell out back the bank loan.
In order to reduce decline, banking companies went forward to aggressively dispose of the equities held by the broking corporations. This singular action led to the substantial offloading of shares by other traders who observed the banking companies action as loss of assurance in the market. The public has developed confidence in the strong funds foundation of the financial institutions since write-up consolidation. Seeing the banks exiting the marketplace was a signal of doom to other traders who have ongoing to mount strain on their brokers to promote off their shares. Confidence is now at its cheapest ebb. No one particular genuinely appreciates when the bulls will return. Even so, just one point is absolutely sure- the lessons learnt from the cost crash can not be neglected in a hurry.