The Nigerian equities market has continued to plunge as investors stayed away despite attractive valuation of most stocks, THISDAY’s investigation has revealed.
THISDAY gathered that while many foreign investors remained on the sidelines, waiting for the policy direction of President Muhammadu Buhari in his second term, local investors remained incapacitated by weak purchasing power to invest among others.
The stock market had suffered high volatility in the months of January, February, March and April due to elections concerns and poor first quarter results by some companies.
But the market rebounded and closed the month of May, the month of the inauguration of the president, with gain, as concerns over the elections subsided. THISDAY, however, gathered that the bears have returned since the beginning of June, as investors await a new cabinet.
Consequently, the Nigerian equities market, it was learnt, has lost N565 billion within the month of June.
Specifically, the market capitalisation has declined from N13.684 trillion at the beginning of the month to N13.119 trillion on Wednesday, while the Nigerian Stock Exchange (NSE) All-Share Index fell by four per cent to 29,772.72
Having suffered a decline of 17.8 per cent in 2018 to negative investor sentiment ahead of the general election and capital flow reversals, the market has remained bearish in the absence of market triggers for most of the first quarter.
The market also recorded significant volatility before the general election with expectations that some stability would return post elections.
THISDAY’s investigation, however, revealed that the bears have remained in control, driving most stocks to record lows.
Some operators said that although the market would recover from second half of the year, they blamed the current weak demand partly on the delay in the constitution of federal government cabinet, and the absence of foreign investors due to the high security risk in the country.
According to a broker, the underperformance of the market reflected the concerns of investors about the short to medium term outlook for the economy.
The broker explained that many investors find it difficult to come into the market now because they are yet to see people that will drive the economy in the next four years under President Buhari.
“Besides, investors are weighing the impact the security risk and poor infrastructure will have on the performance of companies for the half year ending June 30, 2018. Until we see major triggers such as the appointment of competent hands to run the economy, and improvement in the infrastructure, the market will remain bearish for a long time,” the broker said.
The Group Chief Executive Officer, Emerging Africa Capital Group, Mrs. Oluwatoyin Sanni said investors generally just wanted stability and peace, noting that the parameters remain positive for Nigeria from a long-term perspective.
She explained that Nigeria remains attractive because of its size, and demographics because of the continued activities of small, medium enterprises, which are the drivers of this economy.
Another factor, she explained is how the country embraced the digital economy as a people.
“But investors would want to see that there is a stable government, there is peace and government is accepted by the people, investors will want to see they can expect the right economic policy and the policies will be implemented in a consistent manner,” Sanni said.
Also, a Professor of Finance & Capital Market, and Head, Banking and Finance Department, Nasarawa State University, Keffi, Prof.UcheUwaleke, said the early constitution of cabinet members of Buhari administration is one of the factors that will drive stock market recover.
According to him, the steady growth in Nigeria’s Gross Domestic Product (GDP), early signing of 2019 budget and implementation, improved growth in the non-oil sector as other factors that would lead to a rebound in the stock market.
He said the CBN’s MPC triggered the market supportive move in March 2019, by bringing down MPR by 50bps, after 33 successive months, to 13.50 per cent from 14 per cent, adding that he sees prospects of further reduction in the MPR soon.
“Lower MPR will free funds for investments or lending to firms for expansion which will improve their earnings and deliver more value to investors. It has a way of attracting investors, opening the market and hedging risks,” he stated.