• Friday, September 29, 2023
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Market outlook hangs on Tinubu’s reforms

Capital market benefits to the Nigerian government

The outlook of Nigeria’s capital markets post-election majorly depends on the economic reforms of President-elect Bola Tinubu, according to investment and financial advisers who spoke to BusinessDay.

“The whole would depend on what Tinubu does policy-wise. There could still be some mixed impact when we consider subsidy removal. It would raise inflation up significantly but would bode well for the downstream oil and gas,” Akintoye Oyelakun, a portfolio manager at an investment bank in Lagos, said.

He said inflation would however affect consumption generally and raise the cost of production significantly.

He said that in a bit to control inflation, the Monetary Policy Committee might allow the yield environment to go higher.

If this happens, according to him, it means whenever companies want to raise capital, they will do so at a higher cost and that could affect those that will be raising debt instruments, and this could drive companies to raise capital using equities.

“So, we might see an increase in listing in a bid for companies to get capital at a lower cost,” he said. “But this is not all; whatever happens would depend on what policies are implemented.”

Tunde Abidoye, head of research, macroeconomics and fixed income at FBNQuest, said the transition of power and the commencement of the new administration’s term will set the tone for the second half of the year as the new government is expected to implement reforms that will stimulate growth and investment.

“Nigeria’s new president faces several challenges including the fiscal pressures related to fuel subsidies, a huge budget deficit, difficulties with forex liquidity and low productivity in the oil sector,” he said. “Nevertheless, we expect a new manager’s bounce for the economy that will support the moderate rise in equities while interest rates are expected to remain elevated.”

FBNQuest forecasts another positive year for equities in 2023, projecting gains of 15 percent amid a slow first half and relatively strong performance in the second half of the year. In the fixed-income market, FBNQuest expects market yields to remain elevated through Q1 2023 and most of the rest of the year.

Sola Adesakin, finance coach and expert at Smart Stewards Academy, said that amid the tension associated with the 2023 presidential election and the upcoming ones, the stock market of the Nigerian Exchange Limited (NGX) recently crossed the N30 trillion mark in terms of market capitalisation, setting a new record.

Adesakin said: “Some experts believe that the newly elected president will offer reforms to pull Nigeria out of the current economic mess.

“I believe the direction of the capital markets will be ultimately determined by the impact of fixed income yields in tandem with monetary policies, the performance of companies, and overall post-election occurrences.”

She advised investors to continue to carefully evaluate the risks and opportunities of investing in the Nigerian market, embrace financial literacy, stay abreast of facts, and not hesitate to seek professional advice when and where necessary.

Ifeoluwa Adegoke, lead financial consultant at MTWI Services, said that generally, the election time is a season of uncertainty for capital market investors, as the perceived disposition of the incoming administration towards the economic growth of the country can either be a source of confidence to investors or a cause for worry.

“With the various debates around the recent presidential election, the initial reaction of the Nigerian bond and stock market was a negative one after the confirmation of Asiwaju Bola Ahmed Tinubu as the president-elect,” Adegoke said.

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She said that it might be interpreted as a lack of confidence by investors in the political stability of the country.

“However, this is not an uncommon reaction to political power change, especially in a country like Nigeria,” she added. “We have however seen a calmness in the volatility of the markets post-election.”

On March 1, the Independent National Electoral Commission (INEC) announced Tinubu of the All Progressives Congress as the winner of the presidential election.

Ayodeji Ebo, managing director/chief business officer of Optimus by Afrinvest, in his church’s weekly business and investment tips on youtube, listed some of Tinubu’s intended policies and his views on them.

“While these plans appear laudable, their successful implementation would require political will and careful tailoring to Nigeria’s unique context,” it said.

He added that some of these policies are not new and have been proposed by previous administrations without significant results.

“It remains to be seen how the incoming administration will execute these plans and whether they will achieve the desired outcomes,” Ebo said.