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Stockbrokers blame depreciation in shares prices on CRR review

By on September 14, 2013

Stockbrokers in the nation’s capital market have attributed the recent down turn in the market to the review of Cash Reserve Ratio, CRR, by the Central Bank of Nigeria.

The CBN had about two months ago reviewed the CRR for public sector deposits upward to 50 percent from the initial 12 percent, which means that cash available to the banks for lending has been constricted.

They explained that the decision, which has forced some banks to start seeking for alternative avenue for mobilising deposits, sent wrong signal that banks may not declare profit   that would enable them pay dividend at the end of  financial year.

According to them, this has forced some investors to off load some of their banks’ shares ahead of the release of third quarter results.

The NSE trading result showed that between July 31 and September 6, 2013, the market has depreciated by N416 billion or 3.464 percent, while the NSE All Share Index, ASI, went down by 1510.37 basis points or 3.98 percent. The result also showed that in the month of August alone, the market capitalisation decreased by N511 billion or 4.3 percent, while ASI dropped by 1665.79 basis points or 4.4 percent.

According to Tola Odukoya, President, Dunn Loren Merrifield, an independent equity research and analytical company, posited that though some impressive performance has been recorded in the last few months, it would not be sustained due to new CBN’s regulations and guidelines on banks.

A stockbrokers, who preferred anonymity, said that withdrawal of N1 trillion  from the banking system by the CBN did not only help to dry liquidity in the system, but forced some investors   to   dump some of their shares in order to take position other stocks for profit taking.

He stated that with the  upward review of the CRR for public sector deposit to 50 percent, some banks have started working out modalities to revive some of their retail products and make them more attractive to their customers.

Also commenting, Managing Director, APT Securities and Funds Limited, Malam Garba Kurfi, said that speculative trading is on the lowest as most company that have December as their year end have already published their results, adding that there is nothing to speculate on.

He maintained  that some investors have lost investment appetite since most of the half year results declared by the companies were below their expectation and were not good enough to push the market up.