Prior to the February 2019 general election, analysts positioned that the performance of the Nigerian equity market post-election is largely dependent on whoever wins the presidential poll.
They maintained that the domestic bourse might rally if incumbent and All Progressive Congress (APC) candidate, Muhammadu Buhari wins, and would rally more if the former vice president and presidential candidate of the People’s Democratic Party (PDP) Atiku Abubakar emerge victorious because his policies were perceived market-oriented and investor-friendly.
Since the former military leader was re-elected for a final four year term, the Nigerian equity market continues to bleed over policy uncertainty, growth challenge and dwindling profit margin of listed companies. Many posited that the delay of the former military leader to swiftly constitute cabinet also contributed to dampened investor sentiment.
But now that Buhari’s ministerial nominees are being confirmed by the Nigerian senate, will this help trigger investor appetite for naira stocks? BusinessDay consulted four analysts to get their opinion, and here are their comments.
Jerry Nnebue, Analyst at Cardinal Stone Partners
Although stock market rebounded following the release of names of ministerial appointees, this news in isolation is unlikely to sustain an extended rally in the near term. We expect market watchers to be more concerned about reforms and policy initiatives that could be enacted to spur growth forward.
In the interim, IMF’s upward review of its growth expectation for Nigeria is positive for equities although the quality of corporate earnings is capable of swaying market performance either way.
Ologbon-Ori Taiwo, Lead Research Analyst at Cashcraft Capital
Market friendly policies are part of the factors that drive bargain appetite towards investment in equities not cabinet really. Once economic policies are good and economy is responding, market would react.
Cabinets are just to implement government policies. If you have the best brain in your cabinet without market friendly policies, market would not move. A cursory view of newly announced ministers revealed nothing spectacular but pure politics. Meaning that there would be continuity of old policies.
Chukwuemeka Nwagwu, Analyst at Axe Capital Limited
Investor confidence is very low in the market right now and that is the cause of the wide disparity. Some analysts will say when the President appoints his minister the market will push up but I do not see any significant change in the current trend even if ministers are appointed.
It is only when the Federal Government is able to initiate policies that investors consider business friendly that the market can move or otherwise reduce the rates and frequency of fixed income instruments issued.
Ambrose Omoridon Chief Research Officer, InvestData Consulting Limited
Looking at the ministerial list, you cannot find a good technocrat or academician, they are all politicians. They might not be able to deliver effective policies that will boost the economy, and this IS problem for monetary authorities as a blend of both is needed to grow the economy.
The economy is not making significant progress as key macroeconomic indices remain muted. Moreover, the few earnings that have been announced so far are unimpressive and this is sign to investors that GDP figure for second quarter might turn out poor. This explains why investors show disinterest for naira stocks.
