Stories by Chinenye Anuforo and Chinwendu Obienyi
With the Nigerian Stock Exchange (NSE) closing 2017 on a positive note with its market capitalisation, which appreciated by N4.36 trillion from N9.247 trillion it opened the year to N13.609 trillion it closed the year, stakeholders have predicted that the market would sustain the bullish trend.
Specifically, Sola Oni, Chief Executive Officer, Sofunix Investment and Communications Limited, pointed out that 2018 outlook for the NSE is promising. He said, “the Exchange ended 2017 with 43 percent growth. The rally signals a combination of investor confidence and market resilience. CNN Atlanta rated the market the top three worldwide. By CCN’s rating, the market is ahead of Argentina, Turkey and Hong Kong, which were also highly rated. We expect the market to be on higher bullish trend in 2018.
“Investment in the fixed income section is expected to be on the upswing as risk averters made a kill in the sector this year. We expect the Federal Government to utilise the market to fund infrastructure projects as it is a win-win affair for the market and the government.”
However, Oni stated that the forecast was anchored on a mix of factors, including strong market fundamentals as equity prices on the market are still grossly undervalued relative to their intrinsic values, ability of NSE to leverage on its ongoing demutualisation programme to change market structure and reinforce investor confidence, ability of the Central Bank of Nigeria (CBN) to sustain management of forex in stabilising economic activities, effective implementation of the 2018 budget despite its grey areas such as management of multiple exchange rates and interest rates, creative handling of petroleum subsidy despite government’s silence on it in the budget and its obvious challenges as confirmed by the current fuel scarcity whether artificial or not and further extermination of militants’ threats including Boko Haram as they pose country risk to foreign investors, among others.
“As the market is a barometer that gauges economic mood, we expect that stable economic output in 2018 will attract more companies to access funds from the market for capital injection. This will increase the market’s absorptive capacity.”
FSDH Research expects the recovery witnessed in 2017 to continue. According to its 2018 outlook, FSDH Research expects the factors that drove the equity market in 2017 to support the market rally in 2018. “We observed a strong correlation between the historical movements in the NSE ASI and the crude oil price (Bonny Light). The current consensus is that the average price of crude oil will be marginally higher in 2018 than 2017.
“The inflation rate should decline further in 2018, barring adjustments to the pump price of Premium Motor Spirit (PMS) and the electricity tariff. The drop in the yields on fixed income securities should also lead to portfolio realignment towards the equity market. FSDH Research believes the expected drop in the equity market in Q1 2018 is an opportunity for strategic investment in the market ahead of the expected rally in Q2.”
FSDH Research also predicted that banking, building materials, consumer goods and agriculture sectors will do well this year.
On their own, analysts at Vetiva Research have projected major gains for NSE in 2018 as the nation’s bourse is poised to see impressive growth in the new year.
Vetiva Research, in its recently released report titled, “Nigeria 2018 Outlook: Acta Non Verba,” said the growth would be boosted by stability in the country’s foreign exchange (forex) market in 2017.