Uncertainties persist, as investors lose over 40% of 2017 gains
The Nigerian investment climate, especially the stock market is taking a hit, as economic uncertainties, and consequent low liquidity and confidence crises intensify. Of further concern is the likelihood that the current weak market performance could linger, amid persistent low liquidity, as there is now no clear economic plan by the politicians on how to revitalise the economy.
Already, investors have lost over 40 per of the gains recorded in 2017, a development that is eliciting reactions from stakeholders. With more of the listed firms currently hitting 10 year lows, analysts have linked the downturn to weak economy, delayed economic agenda, and uncoordinated fiscal and monetary policies that had kept many foreign and domestic investors on the sideline.
After a January 2017 rally spurred strong anticipations amid improving macro-economic indicators in domestic and global economies, an unprecedented lull set in resulting in a two-year pull back from 2018 and current 2019.
The Nigerian equity market recorded improved performance in 2017, with a year-to-date increase of N4.5 trillion in market capitalisation from the N9.158 trillion it opened with on January 3, 2017 to N13.519 trillion on December 28.
A recently released quarterly corporate earnings of listed companies as at September end, confirmed Nigeria’s mixed macro-economic situation, revealing the slow growth, with the second quarter (Q2) gross domestic product (GDP) figure rising by just 1.94 per cent according to a National Bureau of Statistics (NBS) data.
Analysts argued that the continued decline of the Nigerian Stock Exchange (NSE’s) benchmark All Share index and the weak corporate earnings of listed companies released so far, showed that the economy is in dire need of an urgent stimulus that would revive the economy and bolster the capital market.
For instance, the 111 earnings reports made available to the investing public, about 52 recorded lower profits, while 13 posted negative numbers for the period ended September 30, 2019.The Chief Research Officer, Investdata Consulting Limited, Ambrose Omodion, said persistent uncertainties and lack of economic direction have continued to dampen investors’ confidence. He noted that the development has sparked massive dumping and induced sell pressure on the equities sector in the last few years.
“Technically the current market and economic scenario are not different from what they were in 2016. The difference is however that we are not in a recession, as the GDP remain positive on a slower growth, even as corporate earnings are not as bad as they were between 2015 and 2016. Then, the Central Bank of Nigeria (CBN) intervened early in 2017 by way of foreign exchange policy reforms that brought relative stability to the nation’s currency, while triggering inflows that supported the 2017 recovery.
“The current equity prices are almost at the same level as 2016. The market has suffered losses since early 2018, owing to reasons ranging from uncertainties arising from the 2019 general elections to the weak economy, the prevailing low liquidity and confidence levels.”
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