So my presidential election prediction was somewhat spot on – the eventual winner is over 70, from the north, and Muslim – but it wasn’t as close as I thought.
The margin of victory between the two main contenders was 3.9 million votes. I am sure you have seen the post-mortem analysis of how Aso Rock was won, so I won’t bore you with the details. A key takeaway for me from this election is if you want to be president in 2023, I suggest you become very good friends with Buhari. Buhari has established for himself kingmaker status with a loyal core base of at least 11.5 million voters in the North (NW, NE, and NC). With the exception of 2007 (which was marred by massive rigging and till date no official state by state data release), Buhari poll numbers were 11.8 million in 2003 (loss), 11.7 million in 20011 (loss), 12.2 million in 2015 (win), and 11.5 million in 2019 (win) in the North. Apparently Abubakar Atiku of the PDP is going to court to challenge the results of the election. This is par for the course (and market neutral) as every election results has been contested in court but never overturned. Buhari went to court after every election he lost.
So what’s next? There is likely going to be a new CBN governor. Also we expect the cabinet to be reshuffled. We are very interested in who will be ministers of Finance, Petroleum Resources, Budget and Planning, Power, Works & Housing, and Transportation.
These individuals will be the key players who will shape the monetary and fiscal policy of the country. With the ruling party having a “clear” majority in the national assembly, we should expect easy and quick passage of the budget and confirmations of ministerial appointees.
Read Also: https://businessday.ng/news/article/group-hails-makindes-leadership-in-resolving-lautech-crisis/
Unlike in 2015, we did not see a post-election rally in the equities market this year (NSE ASI has been flat since Feb 27). Was the Buhari victory baked in with investors expecting more of the same? With the political risk of the election subdued, we saw strong movement in fixed income yields days after the election. Elevated demand on both the long and short end of the curve pushed yields down with the 10 yr trading below 14% (down 100-150bps) and the 1-yr at 15.6% (down 200bps). Tracking FX inflows through the I&E window confirm strong FPI participation in the fixed income market. In the last two months $3.1 billion ($1.3 billion in January and $1.8 billion in February) came in and we believe about 80% went in to the fixed income market. We saw over N1.2 trillion demand for the 364-day at the OMO auction last week.
Right now, in the short term, the only catalysts we see for the equities market will be earnings releases, corporate actions and investors looking for strong dividend payouts and yield. Zenith Bank (11.4% dividend yield) and Dangote Cement (8.2% dividend yield) already came through and could be a signal for more to come. Names we are looking forward to include FUGAZ (FBN, UBA, GTBank, Access, and Zenith), Stanbic, Lafarge, CCNN, International Breweries, Nestle, Seplat and MTN. Post earnings, internal catalysts for the markets will emerge from the actions (or inactions) and policies of the re-elected administration of Buhari. As intimated above, the timely appointments of the right personnel into the right key portfolios will send the right signal of “not more of the same”. We might have to wait till May 29 (or is it June 12?) to find out.
