‘ How FG can woo multinationals to stock market, boost profitability'
EXPERTS have renewed calls for the Federal Government ( FG) to adopt a policy that would help reduce persistent volatility in the nation’s Foreign exchange ( Forex) market and stimulate capital market investment.
Besides, they noted that there is a need to consider a downward review of the Monetary Policy Rate ( MPR) to enable listed firms to enhance profitability and increase investors’ access to the stock market.
The stakeholders argued that one of the major reasons the stock market is currently witnessing an unprecedented lull due to investors’ apathy and exit of foreign investors is due to high interest rate and shortage of forex that would deter investment growth and profitability.
According to them, if the interest rate is reasonably low, listed firms can borrow long- term loans, improve profitability and make more investment in the stock market.
It would attract investment into the country and spur activities in the primary market segment of the exchange.
Average Foreign Portfolio Investment ( FPI) per month rose to N85 billion in 2017, as against N43 billion recorded in 2016. The value of Foreign Portfolio participation in equity trading in the NSE hit N851 billion as of October 2017, representing a 60.8 per cent higher than N517.55 billion recorded for the full year ended December 2016.
The improved performance witnessed in the domestic bourse within the period was attributed to the introduction of the Importers and Exporters’ window in mid- April 2017, which helped stabilise volatility and liquidity in the Forex market as well as attract foreign investors into the market.
Already, the U. S. dollar shortage is biting hard in Nigeria with its pangs being felt across all sectors of the economy. Local investors in the capital market had recently expressed fear of likely takeover of listed multinationals by foreign investors, should the Central Bank of Nigeria ( CBN) fail to grant Foreign Exchange ( forex) cover to repatriate their unclaimed dividend.
According to them, if the FG fails to make forex available to foreign investors to repatriate their dividends, it would not only push local investors away from multinationals operating in Nigeria, it would also, increase the quantum of unclaimed dividends in the capital market.
The stakeholders insisted that the scarcity of forex prevents productive diversification and discourages investment inflow into the country, while a stabilised and liquid forex market would woo foreign investors who have been waiting on the sideline or exited the country.
An economist, Johnson Chukwu, said the key issues that can attract more patronage in the market include the downward review of the Monetary Policy Rate ( MPR) policy that would stabilise the foreign exchange market.