The failure of President Muhammadu Buhari to appoint cabinet members six weeks after being sworn in for a final-four year term is weighing on the country’s stock market, and has made investors develop some form of scepticism towards the Lagos bourse.
The delay in forming executive council members may further hurt equity pricing in the short-term as investors are pricing in economic uncertainties and lack of a clear-cut in policy direction in their stock valuation.
Ideally, value investors take position in cheap stocks with strong fundamentals ahead each earning season, but reverse is the case for this half-year period, as the equities market closed in red territory in five trading days out of six (to Monday July, 8).
Some corporates have announced their closed period to enable them consider their financial scorecards for the first-six month of the year, which would have prompted value investors to find their way back into the market, but they seem showing apathy till they understand the policy direction of the Buhari-led administration
Analysts at Lagos-based investment house, United Capital Plc in their note to clients, maintained that investors’ sentiments would be divided between those taking positions ahead of mid-year earning period and those awaiting clarity on the polity environment
“We expect sentiments to be caught between bargain hunters that are taking position ahead of the second quarter earnings season while seeking fundamentally sound stocks trading at cheap valuations, and market pessimist awaiting clarity on the polity environment”
Stocks at Customs street ended their five-day losing streak to gain a marginal 0.07 percent after Monday’s trading, but has lost N141 billion so far in second half of the year.
Three out of five sectors closed in green, with insurance stocks leading with pack with 0.96 percent gain, thanks to Wapic’s activeness on the bourse as 84.9 million units of the insurer’s stock worth N34 million exchanged investors’ hands.
According to analysts, the enlistment of Airtel Africa, Nigeria’s third-largest telco by market share, will boost activities on the domestic bourse in near-term, however, the absence of positive trigger will continue to hurt the market.
“We expect the market to maintain its bearish trend as investors stick to a risk-off approach towards investing in the domestic equities market” said analysts at Lagos-based investment firm, Afrinvest Securities.
The Nigerian equities market has failed to keep up with emerging markets peers, and has shed seven percent since the start of the year, making it one of the worst performers in the space, even as emerging market stocks gained 10 percent year long.
Sworn in Wednesday May 29 2019, Nigeria’s 77-year-old leader, Buhari, faces a long list of challenges including fragile economic growth, low economic competitiveness, hostile business environment, high unemployment and insecurity among others.
It took the former military leader almost six months to appoint cabinet members after the 2015 general elections. A delay opposition party say it contributed to the slow response to the global oil price crash that pushed Nigerian to a recession in 2016.
But some investors wish Buhari had borrowed a leaf from his Senegal’s and South Africa’s counterparts – Sackey Mall and Cyril Ramaphosa, whom immediately hit the ground running by appointing ministers within days of being sworn in to office.