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After two months of the bizarre ill advised 1% cap on downward price movement of stocks on the Nigerian Stock Exchange, the rule has been modified to its previous position. Effective 28th October stocks can move up or down by 5% which was the previous position before 27th August.

The Index promptly fell to 40,163 loosing 3.5% from its previous days close. That is all well and good. The sooner most stocks bottom out the better for everybody. The daily downward slide of the last 36 consecutive trading days has been very damaging to investors’ confidence. The continuous daily slide was largely due to the 1% cap. Now it is gone and hopefully the market will bottom out within the next 20 trading days at worst.

Another rule that seems to have been modified is the 100,000 units rule before an upward or downward movement in price. This has reportedly been modified to 50,000 units. Although this is yet to be confirmed, it will also be another positive development. Some “illiquid” stocks have been stagnant for a while due to this rule.

It will take some time before confidence will return and investors start pouring money into the market. However, the above measures will help boost confidence and hopefully we would see some upward movement in the Index before the year runs out.

In the meantime, my eyes are on the value of daily transactions which have been very low this month. Until this goes up significantly, there will be no meaningful recovery.