Ist Anniversary: Experts predict bright future for capital market

As the Bola Tinubu-led administration clocks one year in office, some financial experts, while assessing the performance of the capital market, have commended the government’s efforts so far.

The News Agency of Nigeria (NAN) reports that Tinubu was sworn in as Nigeria’s President on May 29, 2023, succeeding President Muhammadu Buhari, having emerged winner of the 2023 presidential election.

In the trading week ended May 26, 2023, hours before Tinubu’s inauguration, the NGX All-Share Index and Market Capitalisation appreciated by 1.51 per cent to close at 52,973.88 points and N28.845 trillion respectively.

Equally, as at the close of trading on Monday, May 27, the NGX All-Share Index and Market Capitalisation stood at 97,863.34 and N55.359 trillion respectively.

Regulated by both the Nigerian Exchange Ltd.(NGX) and the Securities and Exchange Commission (SEC), the capital market is primarily a financial institution to raise capital to invest in new projects, expand operations, or pay off debt.

A financial
expert, Mr David Adonri, described the Nigerian capital market as extremely profitable, liquid and a safe investment outlet under the administration.

He emphasised that progress in the market had been defined by a surging bull-rally in the secondary market for equities under the present leadership.

Andori, also the Vice Chairman of Highcap Securities, said that debt capital raising through the capital market enjoyed a sustained tempo under the Tinubu-led government.

He noted that almost all capital raising at the market were either through debt or equities by businesses.

‘When this administration took office on May 29, 2023, the All-Share Index (ASI) of NGX, a metric for gauging performance of equities, was 52,973.88.

‘Thereafter, it proceeded on a galloping race which took it to 102,401.88 on Jan. 26, thereby shattering previous records of growth.

‘ Following its overheating, the equities market is gradually experiencing a correction.’

He said the two major economic reforms of floating the Naira and r
emoval of fuel subsidy embarked upon by Tinubu resonated well with the capital market.

Dissecting the situation, Adonri said that the new ceiling served as a boost to investors’ confidence and increased demand for equities, just as the debt market increased in vibrancy on spite of the increase in interest rates by the Monetary Authority to rein in inflation.

The stockbroker highlighted the public macro-economic policies, saying that ‘the capital market has been akin to a candle burning from both ends’.

‘Consequently, for investors, the Nigerian capital market has been an extremely profitable, liquid and safe investment outlet in the past one year,’he added.

To him, if the fundamentals of the economy and the capital market become stronger, investors’ confidence will remain high.

The resolution of the crisis around trapped investors’ funds, according to the expert, is a vital ingredient to bringing back many disillusioned foreign investors to the market.

To further buttress experts’ position, Mr Tajudeen
Olayinka, an Investment banker, said that the Nigerian capital market had really done well in the past one year.

Olayinka stated that, as a matter of fact, the market started showing a positive sign or bullish run, following the announcement of Tinubu as the winner of the 2023 presidential election.

‘Let me also add that the market started showing positive signs in November 2022 when it was obvious that any of the three leading presidential candidates; Peter Obi, Atiku Abubakar and Bola Tinubu could succeed outgoing President Buhari.

This, from an analytical perspective, the reason being that the three leading candidates were known to be private sector activists, as against the outgoing President’s public sector orientation.

‘So, the astronomical rise in the index we have today started with an uptick that predates the 2023 election proper,’ the expert explained

When President Tinubu made those important pronouncements during his inaugural speech, the market quickly embraced him as a pro-market participan

Some stock and market players have been confident to hail the performance indices which they claimed had recorded three times their values before the conduct of the 2023 presidential election.

They attributed this to the calibre of the presidential candidates as tactical market players.

During the period under examination, the market also recorded massive gains, enriching new investors that came to the market for the first time.

According to Olayinka, the government needs to strengthen all the institutions that provide direction to the market, including the Securities and Exchange Commission (SEC) the Central Bank of Nigeria (CBN), the Debt Management Office (DMO) and Federal Ministry of Finance.

The stockbroker viewed the recent appointment of a new board of SEC, as a positive reaction to improve institutional performance.

Mr Aruna Kebira, a stockbroker with Global View Capital Ltd., also submitted that the market, being information sensitive, was stagnated from the build-up to the 2023 general elec

According to him, this is due to several factors because industry players were unsure of who would emerge winner at the 2023 presidential poll, hence the discordant the by investors.

He noted that after the emergence of Tinubu as president, the market was further enveloped with gloom as a result of the impending court cases and the possibility of judgment being passed in favour of the opposition.

According to him, the announcement of the removal of the fuel subsidy and that the inauguration of a president after the election took the stock market by storm.

Kebira explained that the Foreign Direct Investment

(FDIs) Pension Fund Administrators (PFAs) and the High Networth IndividuaIs (HNIs) which were hitherto on the sidelines, launched a full come-back to the market.

‘It was believed that the incumbent has some good things up his sleeves.

‘The fire in the market was further kindled when the erstwhile CBN governor, Godwin was arrested for an alleged misdemeanour during his tenure as Nigeria’s chief

‘The market began to enjoy its highest patronage when the rates in the money market were not encouraging enough vis-a-vis the sterling performances of the listed companies.

‘Then came along the floating of the Naira that led to the banks declaring super loss and humongous profit.

‘The ASI broke its set all-time high points of 68,000 in 2008 and established another all-time at 106,000 points,’ he said.

According to him, stocks fared well in the capital market during this period, while the rates in the money were moderate.

The stockbroker, however, expressed disappointment that the dollar exchange jumped to N1,950 per dollar.

The resultant effect of this is food inflation, which has contributed to the rise in the general inflation led to the CBN’s hike in the Monetary Policy Rate (MPR) to control inflation.

This development, Kebira said, rebound to a better yield environment at the money market, hence, investors who were constantly in search of better yields, migrated from the capital market to t
he money market.

He said: ‘That frenzy of trying to cover one position at the market normally leads to sell-off pressure that would, in turn, depress stock prices and, by extension, the All-Share Index.

‘The various information and policies of the government are anti-capital markets, and until we begin to see a decline in inflation rate, that would necessitate the CBN to review the MPR downwards, the capital market may be in limbo for a long while.

In addressing the present situation and further boosting and sustaining investors’ interest in the capital market, Kebira advised the Federal Government to provide a secure environment for farmers.

While expressing that the problem currently facing the country is that of demand and supply, the stockbroker, believed that once inflationary trends about food are checkmated with enough to go around, headline inflation will also be stemmed.

‘By that, the CBN can review the MPR downwards, thereby discouraging investment in money market instruments, and consequently,
the capital market can then be an investment destination for high yield-seeking investors,’ he said.

Observers said that the Tinubu-led government, having started well with laudable policies, must aggressively work toward stemming inflation, exchange and interest rates to spur investment in the capital market vis-a-vis the country.

According to them, this is because the positive performance of the stock market as a primary barometer of economic health, both domestically and globally, is interconnected with the broader economic indicators.

Source: News Agency of Nigeria