CEO Interview Small & Medium Scale Business Traders, investors regain confidence after peaceful polls
By Temitayo Odunlami, Mohammed Shosanya & Kayode Ogunwale
Aweek after the crucial presidential election, business confidence is gradually returning across the country. Fears of violence attending the election had affected commerce as many traders fled from their centres of commerce to their home states. The migration had affected flow of business in many states.
Then, of course, many traders simply decided not to replenish their stocks until after the election when they would be sure of a peaceful environment clement for deals. “Business is dull. We are waiting till after the elections to see what will happen,” was the refrain among business people.
Even the stock market was not unaffected by the tension, as trading lagged for the three months preceding the election, with apprehensive investors tarrying on their investment decisions. In the money market, wild campaign spending by politicians compounded the pressure on the naira and the dollar, resulting in continued drop in naira value.
The spending also appeared to have created a liquidity problem in banks, as evident in queues at automated tellers machines, many of which were many times out of cash.
In Abuja, office-to-office clothings hawkers are the ubiquitous norm. But that traffic considerably reduced, no thanks, as Queen, a dealer told Sunday Trust, to preelection blues. Queen stated she, indeed, decided early last month, before the cancellation of the February 14 presidential election exercise, not to travel to Lagos to replenish her stock because of her fears over election violence.
Ogechi and Mama Shade, also peripatetic clothings dealers, said they had not travelled this year at all for new stocks. Rather, they, being more of retailers who sell to their customers on credit, worked hard on collecting their dues from their debtors. Mama Shade explained, before the presidential election, why it would be unreasonable business-wise to sell new rounds of wares on credit this election period, “Many people are fleeing Abuja to their hometowns in anticipation of violence during and after the elections. Some customers won’t tell you they are fleeing, but that’s what they will do, with your money, of course. Moreover, sales on clothings are dull this period. Many Nigerians would rather spend their money piling foodstuffs at home to tide them over what they fear could be a long period of post-election violence than put it on a non-essential like clothings.” Mama Shade maintained last week that she would not be travelling to buy new stocks until well after all the elections.
At Karmo, Wuse and Utako markets in Abuja, the Federal Capital Territory, Sunday Trust last week observed trading tempo had picked up, with many shops shut penultimate week now reopened for business. An electronics trader at Utako market, who wished to be known simply as Uche, admitted he travelled to Enugu, his state of origin, in the heat of the presidential election campaign, “to be safe,” as he put it. “I am back now for good,” he quipped, “after seeing there was no violence in Abuja and the north generally, as we feared.”
The cash crunch situation at ATM centres didn’t seem to be completely over, though, by last week. Before the election, there were panic runs on the machines, as observed in Lagos and Abuja, and long queues. Besides the frantic demands on the machines, many banks just didn’t possess enough liquidity to fill all their machines enough to dispense cash all the time. In Abuja, where some banks have two, three, four ATMs, only one was seen servicing drawers, with many displaying the notice, ‘Temporarily Unable to Dispense Cash’.
Our correspondent reported from Lagos that the situation had eased last week in the commercial capital, with the queues disappearing and drawers transacting effortlessly. But it persisted in Abuja, with many machines still ‘temporarily unable to dispense cash.’ A Daily Trust staff, Isiaka Wakili, expressing his frustration when he went round many ATMs in Abuja last Friday to withdraw cash, said many machines had no cash to dispense and there were long queues at those that had.
A major gainer of the violencefree presidential election was the naira. Plagued by many factors, including politicians’ wild use of the dollar for campaigns and consequent shortage of the greenback, the Nigerian currency was having a free fall, hitting N224 to a dollar at the parallel market before the March 28 election. But it had remarkably firmed up by last weekend, exchanging at N211 to a dollar.
Also looking up now is the stock market, as post-election calmness seems to have restored investors’ confidence. The market, which had been on a negative trend between January and March, magically recorded a historic gain of over 8 per cent gain after Gen. Buhari was declared winner of the presidential election. The trading outcome recorded on April 1, 2015 has been noted by market analysts as the largest gain in the history of the exchange since inception over 50 years ago.
Equities had lost N801 billion between February 9 and February 13, 2015 when INEC announced shifting of election in early February. A week after the postponement announcement, market capitalization of equities listed on the Nigerian bourse closed at N9.204 trillion, down from the N10.005 trillion figure it opened with on February 6.
But equities received a huge boost as it recorded the first ever highest gain of N904 billion, representing 8.45 per cent in a single trading day. When the closing bell rang on the first trading day after Buhari emerged president, equities value gained N904 billion to settle at N11.621 trillion, from N10.717 trillion it opened on the day.
Also, the Nigerian Stock Exchange All-Share Index appreciated by 2,643.64 points or 8.88 per cent, from 31,744.82 points to close at 34,388.46 points. Market turnover closed positive as volume moved up by 132.33 per cent, against 93.34 per cent recorded in the previous session. Access Bank Plc, FCMB Plc and FBN Holdings Plc were the most active to boost market turnover. FBN Holdings Plc and Guaranty Trust Bank Plc topped the market value list.
The NSE Industrial Index recorded a 9.76 per cent gain to emerge the most supportive sectoral index, while the NSE Alternative Securities Market Index emerged the worst hit.
The market maintained
its bullish momentum in its equity segment with a gain of N514 billion on Thursday, which was the second trading day.
The local bourse continued to record strong bullish trading on the back of a smooth presidential election as buying momentum heightened in the market. The market recorded further gains as the ASI gained 3.92 per cent to close at 35,728.12 points, which pegged the year to date return at 3.1 per cent.
Financial analysts described Gen Buhari’s victory as president of Nigeria as a boost to investors’ confidence. They tied the robust gain recorded on April 1 to the outcome of the presidential election which was without any rift. They said the capital market is information-driven and relies on activities in and out of the country.
Speaking with our correspondent, Managing Director of APT Securities and Funds Limited, Mallam Kasimu Kurfi said the current inspiring performance of trading is a sign of confidence in the nation’s bourse. “This is beyond anybody imagination,” he said.
According to Kurfi, “because of uncertainty around this election the stock prices were too low.” He noted that many investors did not believe that there wouldn’t be any crisis before, during and after election, but to their surprise, the opposition party won the presidential election without any chaos even before the results were declared.
He said that with the peaceful conduct of the elections, confidence returned to the market, encouraging many investors to return there and putting many stocks on bid.
Also commenting on the development, a stockbroker with Gruene Capital Limited, Mr Aruna Kebira said the huge gain recorded in the stock market in the last two trading days was a sign of confidence in the elected president.
According to Kebira, initially, there was capital flight by foreign and local investors from the market as nobody knew the direction postelection Nigeria would take. “But when investors saw that the election went peacefully, they had no choice than to return to the market,” he said.