Investors warn against comments capable of unsettling economy

As the primary elections of political parties across the country ahead of the 2023 polls are held, capital market investors have urged the political class to refrain from making unguarded utterances capable of impacting negatively on the capital market.

Already, there are concerns among investors on the 150 points rate hike by the Central Bank of Nigeria (CBN), and fears of an impending global economic recession on the back of the Russia-Ukraine war that has disrupted commodity supply chains since the second half of February and continues to fuel the ongoing inflationary pressure across the globe currently.

According to stakeholders, general elections in the country have set a pattern of disrupting economic activities, with unusual concerns that put sectors into speculative mode over new policies or policy changes by the government.

These policy changes or inactions, may affect adversely or favorably the operations of these companies and in turn, impact their prices in the stock market and make investors wary of the market.

The stakeholders argued that while other emerging markets’ exchanges and developed countries recover faster from pre-election anxiety, the Nigerian stock market records astronomical fall in share prices, even post-election.

Managing Director of Highcap Securities Limited, Imafidon Adonri, explained that insecurity and social disorder are disincentives to investment. According to him, those who control the polity, especially the politicians and the executives, need to be upright and follow due process and perform well, so that the polity will be calm going into the election.

“They do not need to overheat it. They need not come up with frivolities that will cause conflict and crises, because these are the things that affect the capital market.”

He urged law enforcement agencies to be more proactive, identify flashpoints and ensure a robust security arrangement is implemented to prevent breakdown of law and order during the campaigns.

Corroborating this view, the President, Issuers and Investors Alternatives Dispute Resolution Initiatives (IIDRI), Moses Igbrude said because the nation’s economy is not developed, whatever happens in the political arena must have an adverse effect on the market.

Adonri pointed out that the capital market is not immune from happenings within the system but mostly driven by pronouncement and actions within the system.

According to him, this is the best time for the politicians to caution themselves from actions and pronouncements that can affect the market negatively.He enjoined the political class to moderate its activities and utterances by acting in such a manner that could boost investors’ confidence and grow the economy.

In 2019, political intrigues ahead of the general elections made stock market investors lose N729 billion in three months, contrary to general expectations of positive earnings in 2018, as the once-troubled economy emerged from a recession at the end of 2017.

The months of decline occurred between February and April, after a January rise triggered strong anticipations amid improving macro-economic indicators in domestic and global economies.

Analysts had blamed the flattish look of the market on the tension that plagued the political space during the period. They said killings by herdsmen and cases of political thuggery aggravated apathy in investment, especially on the part of the foreign investors.

However, this year, during the same pre-election period, investors have gained over N5 trillion in four months, amid uncertainties in the global economy and rising insecurity in the country.

After getting to a rock-bottom low for several years, the equities market has recorded an unprecedented upbeat rally since the beginning of the year to emerge the best performing market in Africa and third in the world.

The NGX’s All Share Index (ASI), an indicator used to track the general market movement of all listed equities on NGX, crossed 53,000 mark to hit a 14-year high for the first time since 2008, as indices soared significantly by N5.4 trillion from the beginning of the year.

Specifically, ASI opened the year at 43,026.23 to close on Friday, June 3, 2022 at 52,908.24 points for the first time since 2008, representing 18.7 per cent appreciation, while trading for the year opened on January 4 with N23.187 trillion to close on Friday at N28.523 trillion, representing N5.336 trillion increase.

President of New Dimension shareholders Association, Patrick Ajudua said capital markets all over the world thrive on information. “Therefore any unguarded statement has the tendency of affecting the market negatively. Hence politicians should be well guarded as to how they make comments with regards to their views, expectation and assessment of the market.

“As a politician, we need to remember that the market is made up of local, foreign, institutional and retail investors. Hence your statement will either make them stay with the market or ‘take the exit door’.

“Also the market serves as a bridge where the government at all levels accesses funds for developmental or infrastructural purposes. Hence it will serve no good if the market can not perform such function due to lull occasioned by unguarded pronouncements from the political class.”

The President of Ibadanzone Shareholders Association, Eric Akinduro said: “ My appeal is that politicians should reflect on what happened in 2015 campaign and its effect on the economy and be mindful of their campaign language because when they heat up the economy and create unnecessary panic and instability in the capital market and the economy, it will affect everybody.”