Soludo Takes Lawmakers to School on Capital Markets

The former CBN governor, Charles Chukwuma Soludo has taken the lawmakers to school on the Capital Markets. His testimony before the House Committee on Near Collapse of the Capital Markets was more like a lecture as he informed the honourables that stock market crashes are a normal occurence in the life-cycle of any economy.

According to Soludo, “stock market crashes will always happen: no amount of ‘reforms’ or ‘regulation’ will stop future ones. The jury is still out on what constitutes ‘appropriate’ regulation or ‘reforms’ of the market: debate raging in US now, over vs under-regulation.”

He said the stock market was simply a reflection of what obtained in the larger socio-political strata of any economy saying it was the mismanagement and bad leadership in Nigeria that waas responsible for the market crash.

His words, “Think about Nigeria’s ‘Newspaper Headline Index’ — how many positive per week versus negative! Political economy of change in Nigeria is one step forward, three backwards! The Stock Exchange cannot be better than the systemic competitiveness of the economy. Investors are not stupid (when the Market was booming, Nigeria was not rated No.14 failed State in the world— think about this!) — see all the reversals of privatisations, etc. Stock Market is simply a barometer.

“How are we sure that the market is not just reflecting the fundamentals of the economy? What kind of market do we want— a market that leads the economy or that follows the economy? Let us define our target/destination and how far we are from it before we know the appropriate vehicle to reach there.

“How come that in three years and with monthly oil price averaging $100 per barrel and over 2mbd, and with all the ‘reforms’ in money and capital markets (supposedly there is no more lax regulation/supervision) and despite Dangote’s over N2 trillion listing which lifted the market cap over N8 trillion, the market cap is basically today at the level I left it three years ago?”