Stock investors price in likely outcome of Nigeria’s election

The past weeks may have marked a turning point in Nigeria’s political history, but uncertainties that earlier beclouded the possible outcome of the presidential election seem to be whittling down.

Nigerians will this Saturday go the polls to choose their next president in a keenly-contested election between Muhammadu Buhari, incumbent president and ruling All Progressives Congress (APC) flag-bearer, and Atiku Abubakar, a former vice president and presidential candidate of the People’s Democratic Party (PDP). While Nigeria’s major opposition PDP, after 16 years in power, is working very hard to regain its populist position in the run-up to the elections, the ruling APC is also trying to turn the tide in its favour after criticisms that it led Nigeria to become home to highest number of very poor people in the world. But more investors are routing to take shots into value stocks on the back of the whittling down of political uncertainties ahead of Saturday’s election following projections that the election will be largely peaceful.

“Because there are no longer election uncertainties, what happens in this case is bargain hunting in anticipation of post-election rally,” said Fola Abimbola, an equity research analyst at FBN Quest. “People are expectant that there will be a peaceful transition going by previous election outcomes,” Abimbola said. Lucky Djebah, an equity research analyst at Lagos-based Qualinvest Capital Limited, said the market would rally irrespective of who wins.

“If Buhari wins, the market would rally, but if Atiku wins, the market will rally the more,” Djebah said. “The reason the market will rally the more is that there are lot of funds that are trapped because of anti-money regulations. Whether we like it or not, those are slush funds; they go into every system, and those kinds of inflows have been coming to the Nigerian market and once the government fights with anti-money regulation, you see those inflows will hang. “If it is an Atiku that is more loose in terms of corruption, you will see some of those inflows coming into the market. The market will receive Atiku’s win more positively than Buhari’s victory. With Buhari’s victory, the market will move but not as much as if Atiku is declared the winner,” he said.

Nigerian stocks began a resounding rebound last week with their returns comfortably in the positive territory of +3.13 percent, representing value accretion of about N330 billion as evidenced in investors’ decisions to stage a comeback on Custom Street.

Before a negative close recorded Wednesday, February 13, stocks were up to their highest level in almost four months as equity investors were seen taking positions in cheap stocks with sound fundamentals and good records of dividend payment, owing to rising optimism of market rally after Nigeria’s 2019 general elections scheduled to kick off this Saturday.

The stock market which opened this year with record value of N11.721 trillion stood at N12.057 trillion at the close of trading on Wednesday.

Equities started recouping losses last Friday after a loss of N2.3 trillion last year when foreign investors pulled out over N600 billion from the market. Before now, investors were guided to trade cautiously as many analysts’ outlook for the Nigerian equities in the near-to-medium term remained negative.

This was because of the absence of a nearterm positive catalyst and earlier political jitters ahead of the upcoming 2019 elections. The benchmark index of the NSE All-Share Index (ASI) fell marginally by 15 basis points to close at 32,413.92 points, causing its year-to-date return to wane to 3.13 percent. Despite the declines recorded by stocks of the mid-tier lenders on Wednesday, banking stocks still remained investors’ toast during the trading session. Diamond Bank led the most traded stocks by volume, trading 131 million units worth N314.36 million.

Zenith Bank trailed with 44.09 million units valued at N1.1 billion, while over 40.61 million units of United Bank for Africa (UBA) shares worth N319.49 million exchanged hands. After the close of business Wednesday, C & I Leasing lost 9.95 percent to N7.33. Champion Breweries depreciated by 9.55 to close at N1.61, while PZ Cussons Nigeria slumped by 9.43 percent to N12. On the other hand, both Berger Paints and Unilever Nigeria gained 10 percent to close at N8.25 and N44, respectively, while Unity Bank extended previous day’s gain by 9.47 percent to N1.04.

The February 16 presidential election is projected to be a tight two-horse race, but the Economist Intelligence Unit (EIU) Africa report insists that Atiku, the PDP presidential candidate, will win. The margin of victory is getting narrower as the election approaches, said EIU Africa team in its report ‘#NigeriaDecides2019: Less than 2 weeks before #Nigeria’s presidential election’, but Atiku and his political party will win the historic election.

IHEANYI NWACHUKWU & OLUWASEGUN OLAKOYENIKAN