Market boosting policies non-negotiable as stock investors’ excitement fades

The Nigeria equities market is currently in dire need of clear economic policy direction and implementation to ensure a broad based improvement in listed stocks across the board.

The last two weeks has seen the stock market mirror the performance of the major competitors in market capitalization; MTN and Dangote Cement, both of which have created an “artificial rally” but have not convinced investors to overlook broader economic concerns and stake in Nigerian business.

“While we anticipate investors to take position in fundamentally sound stocks at cheap prices, we expect the negative performance to persist in the absence of any major catalyst,” a report from Afrinvest stated.

The equity market faces currently, the possibility of returning to its previous state where investor’s negative sentiments weighed on performances.

Analysis of the year to date performance of stocks listed on the NSE30 index

portrays to a large extent investors’ lack of impetus towards the market. However, good policies and moves by the government are expected to spur investors’ appetite towards the market.

The strong negative sentiment is evident in the performance of NSE 30 stocks so far in the year.

Of the 30 biggest companies on the exchange, just 4 company stocks recorded positive year to date returns.

Major issues have been raised on the inability of private sector firms to access credit facilities from deposit money banks due to the high interest rate environment and banks’ increasing appetite towards the fixed income space.

Nigerian policy makers however in the last MPC meeting, urged banks to turn on the taps and increase lending to stimulate the economy, or have access to a near-risk free way of making money choked off.

Also, downstream companies in the oil and gas sector could benefit from the advocacy of deregulation if implemented as this is expected to improve their profit margin which has been shrinking, evident in their financials.

“The passage of the Petroleum Industry Bill (PIB) will see upstream companies boost revenue as they won’t need to compete with NNPC in crude oil production,” an analyst who didn’t want to be mention told Businessday.

Also, the NSE remains silent however on its plans to demutualize despite the bill was successfully signed by President Buhari in August 2018. This is however anticipated by analyst to provide a boost for the NSE.

Highlighted by Oscar Oyema, CEO NSE, the demutualization of the NSE is towards “facilitating the development of the capital market, improved corporate governance, availability of resources from capital investments, enhanced competitiveness, increased global brand and visibility of the exchange, investor participation opportunities and ability to build a more sustainable institution.”

The Nigerian Stock Exchange is aiming to complete its public listing this year, its chief executive told Reuters on Thursday.

“We are shooting for this year for the demutualisation to be completed,” NSE chief executive Oscar Onyema said.