The current level of most equities prices at the Nigerian Stock Exchange (NSE) offers positive prospects and major re-entry point for risk averse investors to access the market.
The value of Nigerian equities reached a record low last year, as investors lost N1.9trillion, driven by their fears of the possible the outcome of the country’s coming general elections (which hold next month) and the negative impact of oil price decline liquidity flow into Nigerian stocks.
Trading opened this year at the Nigerian bourse with the NSEASI lowering to 33,943.29 points, while the value of equities dropped to N11.237trillion.
Prior to Christmas, Nigerian equities rallied remarkably, as investors showed interest in oil & gas stocks.
The Tony Monye-led team of analysts at Access Bank plc linked the recovery in the stock market to a “surge in demand from local investors hoping to take advantage of low prices on the bourse in expectation of future capital gains.”
Despite weaker than expected global growth and stable or declining commodity prices, the World Bank recently said that African economies, including Nigeria’s, have continued to expand at a moderately rapid pace, with regional gross domestic product (GDP) projected to strengthen to 5.2 percent yearly, between 2015 and 2016 from 4.6 percent in 2014.
The market capitalisation which stood at N13.379trillion as at January 8, 2014 dropped to N11.48trillion at close of transactions Wednesday, December 31, 2014; while the NSE All Share Index (ASI) dropped to 34,657.15 points at the end of last year, from a high of 41,476.22points as at January 2014.
Despite the remarkable negative returns recorded last year, investment sentiments fovours increased funds flow into Nigerian equities, as the economic outlook remains positive.
This is in addition to prospects of a rebound, as investors’ position in stocks as companies release their year-end financials in this first quarter.
“We expect the market to continue the current rally witnessed in the last week, as we see investors taking position in value stocks for FY’14 results,” said market analysts at Lagos-based UBA Capital plc.
“We anticipate sustained positioning on value stocks in anticipation of year-end benefits declarations,” said investment analysts at Cowry Asset Management Limited, another Lagos-based investment house.
“Recall that the oil price sudden drop from above $100 to $67 led to a significant reduction in revenue accruing to the Federation Account in Nigeria and a resultant impact on the value of the naira.
“ The oil price crash is now upending the global economy, with ramifications for every country in the world. Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline is the cheapest it’s been in years. But it’s a different story for nations reliant on oil sales –like Nigeria. The naira, relative to the US dollar closed last year on a weaker status”, an analyst said.
Despite that the Central Bank of Nigeria (CBN) devaluing the naira after several efforts to defend the local currency against the greenback, forex market figures show on a year-to-date basis, the naira lost 8.39% to N168/$ on the official market; lost 15.55% to N184.83/$ at the interbank market segment; and at both the BDC and parallel markets, the local currency dipped relative to the dollar by 10.82% and 10.40% to N189.5/$ and N191/$.
Iheanyi Nwachukwu
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