September

September was a tough month for investors in Nigerian quoted equities. The NSE All Share Index declined for 17 straight days loosing 6.1% in the process and down 20.3% for the year. Value of transactions during the month was a meagre N134 billion, the lowest for the year. Most stocks were on offer throughout the month with no buyers in sight.

The current situation should not come as a surprise given the trend in the last 6 months. The 1% limit placed on downward movement in stock prices has not stopped the decline. What it has succeeded in doing is driving away speculators from the market. Without speculators, liquidity has all but disappeared. In addition, the continued daily slide has continued to weigh on investors mind further draining away their fragile confidence in the market.

The Central Bank of Nigeria announced further measures in September to improve liquidity. These included the reduction in Cash Reserve Requirement and liquidity ratio for banks. So far the new measures have not affected the market positively.

What next? Can it get worse? The reality is that we are in uncharted territory. World markets have been in a state of turmoil throughout the year with almost all markets in negative territory for the year. The good news however, is that Nigerian banks have not been involved in the reckless financial engineering that has threatened the very survival of some US banks.

My advice is to stay out of the market if your horizon is less than 2 years. For those with a long term view, now is the time to consider value investing. There are definitely bargains to be had.

October promises to be interesting. Will the year low achieved on August 26th be breached? We will know in the next two weeks. Stay tuned.