Nigeria Content Online

The mixed fortunes that trailed trading at the Nigerian capital market during the first quarter of the year are expected to continue this quarter, according to some finance experts.

This is coming despite the resumption of the new chief executive officer of the Nigerian Stock Exchange (NSE), Oscar Onyema, whose assumption of office was expected to restore confidence in the market. Some analysts say the Exchange may still witness low investors’ patronage this second quarter, especially from fund managers. They hinged their argument on the fact that attention is currently been shifted to the money market following the recent increase in interest rates.

The NSE, which recorded a total loss of N260 billion on equities in February, further lost over N449 billion at the close of trading activities in March, after recording significant gains of N662 billion in January.

The NSE’s Strategy and Business Development Department attributed the downturn in market, which started in late-January and continued during the first quarter, to “low liquidity arising from low incomes and reduced savings, mixed performance by quoted companies and profit taking/loss cutting by investors.”

But Femi Oladehin, vice president and managing director of BGL Limited, an investment bank, said political risks in the country and the crisis in the Middle East and North Africa region contributed to the woes as a result of the withdrawal of funds by some foreign investors from the market.

Mr. Oladehin said uncertainty would remain in the market this quarter because “significant contributors of trading in the Nigerian market are foreign investors as against local investors.”

External factors

Also, analysts at Renaissance Capital, an investment bank, said, “The performance of the market in the first quarter was largely muted as a result of a sell-off on the back of a perception of higher sovereign risk, uncertainty related to the April elections and the late release of banks’ financial year results.” They added that external factors like the sell-off in frontier markets and heightened uncertainty ahead of the April elections will continue to weigh on the market, adding that “high oil prices, the potential appreciation of the naira, completion of elections, and conclusion of privatisation transactions in the power sector, are “catalysts to watch” this quarter.

Market watchers also said that if the elections are peaceful, the Exchange will start recording stable rebound in early May. Other market drivers identified to bring stability include the creation of a Sovereign Wealth Fund, the completion of Asset Management Company of Nigeria loan purchases, the completion of banks’ mergers and acquisitions, and the extension of trading hours.

Analysts at Vetiva Capital Management Limited, a financial service company, said the market is expected to perform better in the coming months on the back of quoted companies posting “positive earnings growth induced by higher profitability and stronger balance sheets.”

They added that other expectations in the market include investor optimism; barring any negative surprises on the political front, a post-election rally in the equities market, and increased portfolio flows from developed markets as investors search for higher returns.

Market agenda

In the mean time, although Mr. Onyema said he will soon unveil his agenda for the market to further boost the current high foreign participation at the bourse and also woo more local investors, some market operators have advised him not to rush in handling the various projects he met on ground.

Virginus Agada, a stockbroker at Eurocomm Securities Limited, a stockbroking firm, said, “We expect him to be calm in handling issues. We also don’t expect him to start witch-hunting so that operators do not lose confidence in his leadership.”

For David Amaechi, an executive member of the Shareholders Association of Nigeria, Mr. Onyema should make demutualisation of the NSE one of his priorities “to enable the market community own the Exchange so that few hands don’t hijack the whole market.”

Demutualisation is transforming the Stock Exchange from being a self-regulatory organisation to a public organisation.