Following the recently finished important national election, Nigeria’s key financial markets, notably the foreign exchange, forex, and stock markets, substantially changed for the better.
The local currency gained dramatically in the parallel market, where it traded at?765.00/$1.00 as opposed to N780.00/$1.00 the previous week, and against the US Dollar in the Investors and Exporters Window (I&E), the official end of the foreign exchange market.
Also the Nigerian stock market traded at its 16-year high performance in both market capitalization and index despite the electioneering tension across the nation, a development investment analysts have attributed to optimism over the likely outcome of the Presidential and National Assembly elections in Nigeria last weekend.
While the All Share Index, ASI, close on Friday at 54,949.21 points from 51,251.06 points, the market capitalization hit N29.9trillion representing a year to date return of 7.2% or N2.018 trillion from N27.915 trillion.Many analysts had predicted that the market may follow the usual election year downward pressures, and some weeks between December 2022 and Ja
nuary 2023 actually recorded some significant bearish trading.
However, buying pressure ahead of 2022 full-year audited corporate financial results in the midst of the uptick noticed in the fixed income market rates and yields kept the market in a mixed performance since begin of this month.
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Despite the cautious trading and volatility with market players digesting the latest 2022Q4 Gross Domestic Product, GDP, data, and the current cash crunch, the market closed positively last week just before the tension socked presidential and National Assembly elections at the weekend.
Stock dealers said that the Nigerian Exchange Limited, NGX remaining upbeat on the eve of a major election season is a complete change of pattern in the history of Nigeria’s stock market.
Some market analysts attributed the situation to the change in market’s holding structure, post covid 19 impressive corporate performance, impact of newly listed companies among others.
Market trend and performance this time was also a departure from mixed sentiment in the past election years and seasons, especially on the 2015 and 2019 elections.
The improved local participation of Nigerians, especially institutional investors, high net worth players and savvy retail investors that understand the whole system and perception of politics in Nigeria made the market to remain strong.
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Experts’ insight
Giving insight on the change in market behaviour Tajudeen Olayinka, CEO, Wyoming Capital and Partners, an investment banking house and major stock market dealer, told Financial Vanguard that the investors are seeing a new dawn in the political leadership of the country tilting in favour of private sector.
He stated: “what is happening in the across markets in Nigeria at this time are indications of investors bullish sentiments on the possible transition from a government that has consistently pursued public sector domineering focus over the last eight years to a new government that is expected to pursue private sector dominance, because of the fact that the three leading presidential candidates are private sector centric. So, markets are bullish on transition.”
Also talking to Financial Vanguard, the Head of Research and Investment at Fidelity Securities Limited, Victor Chiazor, said: “All of the positives being experienced from the gains in the equities market to the Naira appreciation in the official and parallel market are all as a result of investors optimism about the outcome of the elections.
“However, if Nigeria elects a leader that is not pro-market, we will see a significant reversal of the gains recorded so far as most positions taken by investors will be quickly liquidated.”
Also speaking, Managing Director/CEO, APT Securities and Funds Limited, Mallam Garba Kurfi, said: “Generally when the election is conducted peacefully it triggers the market and it goes up for a while especially if the expected person win the Election. But to sustain the momentum needs more to do with the statements of the incoming President about the economy.”
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Commenting, analysts at InvestData Consulting stated:”We expect a mixed and positive sentiments to continue as market players digest Q4 GDP figure of 3.52% ahead of the general election and uptick in fixed income market rates at the end of the latest Tresury Bill, TB auction in the midst of corporate earnings expectation, portfolio rebalancing, falling rates and anxiety over the election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe.”
Similarly, analysts at Cordros Research said:” We believe investors will be focused on the outcome of the highly anticipated 2023 Presidential elections. Thus, we see more of a “choppy theme” as cautious trading dominates the trading activities.
“Overall, we advise investors to seek trading opportunities in only fundamentally sound stocks as the weak macro story remains a significant headwind for corporate earnings.”
Analysts at Afrinvest West Africa gave their expectations thus, “we expect that the incoming administration would begin to implement market friendly reforms and deepen the fight against insecurity and oil theft.
“However, given the time lag required for the impact of reforms to manifest, we are less optimistic of any positive GDP surprises in the short term.”
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