The argument on which administration would be beneficial to the performance of the equity market persists as some analysts are sceptical about the potential of current administration to spur market performance.
According to report by the Economist Intelligence Unit (EIU), “we expect the PDP presidential candidate to win, but for the next administration to flounder against the same problems as the incumbent one”.
However, Paul Uzum, a Lagos based stockbroker explained, “The current administration doesn’t look like a stimulating factor for market uptick. A change in administration after the 2019 elections should see market rally”.
BusinessDay analysis of market performance since the inception of the current administration to date showed that the All Share Index (ASI) dipped 11.4 percent from 34,708.11 point in May 2015. Meanwhile, 2 years after the equity market dipped as low as 25,189.37 points. However, market began rallying in the second quarter of 2017 to highest level of 45,092.83 in 5 years.
The year 2018 has been an unimpressive year for the Nigerian stock exchange market (NSE) compared to other pre-election years, as market remains in the bearish zone ahead of the general elections.
As at Tuesday, the All Share Index performance dipped -19.96 percent year to date, closing at 30,609.06 points.
Meanwhile, some analyst are of the opinion that irrespective of the administration in power, concentration on major reforms around foreign portfolio investor’s confidence, economy privatisation and tax incentives are sufficient to boost market performance in 2019.
Massive market sell offs has been witnessed due to investor’s reactions to uncertainties the 2019 general election may bring amongst other factors.
Analysts resolve that the market lacks currently major incentives that with boost market performance until the conclusion of the 2019 general elections.
Dolapo Ashiru, Lagos based stockbroker on the NSE explained, “There has to be a lot of policy reforms. At the macro level, the government needs to open the economy more and be investor friendly with incentives because as we have scared away a lot of foreign portfolio investment (FPI) and foreign direct investments (FDI)”.
BusinessDay analysis of foreign portfolio participation in equity trading as released by the NSE, showed that FPI investment declined by 49 percent between January and September 2018.
September recorded total foreign transaction of N84.33 billion compared to N166.39 billion in January. Meanwhile, foreign inflow declined by 56 percent during the same period to N40.54 billion from N91.75 billion.
Henry Obuaku, group Head Asset Management, GDL explained that “foreign portfolio investment and purchasing power of the people determines to a large extent market performance”.
“The government must concentrate on boosting foreign portfolio investor’s comfort in the areas of macroeconomic stability, political stability and security stability” Ogbuaku added
“Since Nigeria exited recession, the purchasing power of people has been low. The minimum wage agitation of the labour union isn’t the solution instead achieving a better standard of living” Ogbuaku added.
“When the government provide housing, good education and more jobs, people will have more money to spend and to invest” Ogbuaku concluded.
Analyst further explained that since the NSE consist of private companies listed on the exchange; paying more attention the private sector space will induce company’s performance across sector, which will translate into market performance.
Paul Uzum, a Lagos based stockbroker on the NSE, “the equity market mirrors the economy showing investor’s sentiments on changes in economic events. The government need to focus on the performance of the private sector and privatisation of some key institutions”.
The recent MTN and CBN saga has led to several negative perceptions for the Nigeria economy, driving away foreign investors and showing a high level of inconsistency of the Nigerian government.
“The current perception of the Nigerian economy under this present government is a negative one for foreign investors” Uzum concluded.
“We need to privatize a lot of government parastatals, for example the NNPC as well as other gas companies needs to be unbundled and opened to private investors; the rail way space also needs to be opened to private investors” Ashiru concluded.
“Tax incentives should be encouraged for private companies on the basis of entry into the stock market. This stimulate more privately owned companies come on board and trade their shares on the nation bourse” an analyst told BusinessDay.
However, the future of the Nigerian Stock exchange market remains bleak as economist opine that policy reforms will be slowed as a result of divisions in the political elite between advocates of tough, unpopular market reforms and those who prefer pandering to nationalistic and pro-subsidy interest groups.
“The latter group is likely to remain in the ascendancy”, EIU concludes.
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