Capital Market: Operators confident of improved performance despite challenges

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BY PETER EGWUATU &  NKIRUKA NNOROM

Capital market operators expressed confidence that  2014  will be another ‘above average’ year for the stock market and the economy despite the generally perceived risks around the coming elections.

File photo: The  floor of Stock exchange

File photo: The floor of Stock exchange

They, however, said that there are some nagging challenges that must be urgently addressed for the economy to realise its full potential within the year.

For them, issues surrounding oil theft, depletion of foreign reserves and channelling more funds toward capital and developmental projects rather than recurrent expenditure items need to be tackled.

On the economy

Tola Odukoya, Vice-President, Dunn Loren Merrifield, and an investment banker said, “In my opinion, the performance of the economy was a mixed bag.

On the positive side, we saw a drive by the Federal Government to reposition agriculture as a key revenue source for the economy with some appreciable degree of success. Also, the successful privatisation of the power sector is a massive step in the right direction.

Despite the current challenges the operators are facing, I believe Nigeria is moving in the right direction in this regard.”

“On the other hand, I am concerned about the country’s growing debt profile – especially foreign debt and the increase in oil theft and dealing oil revenue and foreign reserves. This was further exacerbated by the high rate of youth unemployment, which is dangerous for a country with a young and growing population,” he added.

Victor Ogiemwonyi, Managing Director, Partnership Investment Company enthused that, “2014 is expected to be another ‘above average’ year despite the generally perceived risks around the coming elections and the US Federal Reserve Bank  probable start of tapering.

This is expected to drain the liquidity occasioned by the Fed policy of the last few years, and the easy money that has come with the policy to pump liquidity into the US markets to keep it functioning normally.”

He observed that the risk associated with elections in Nigeria cannot be worse than what was seen in the recent past and therefore, exaggerated.

David Adonri, Managing Director, Lambeth Trust and Investment Limited, stated that Nigeria’s macro economy was stable in 2013, adding that exchange rate was reasonably stable while inflation rate declined to single digit.

He noted that in 2013, Nigeria remained a preferred investment destination in Africa, saying that massive foreign portfolio investment inflow in the economy as a result increased activities in the debt market, and propelled the equities market to a new height.

“Nigeria successfully completed the process of Electric Power industry reform with privatisation of state enterprises in the industry.

The catalytic role of this exercise is expected to manifest in due course. It will truly herald the transformation of the economy to greater heights from 2014,” he stated.

“However, for Nigeria’s economic potentials to be fully realised, consumption subsidy must be discontinued; the economy must be fully privatised, corruption must be ruthlessly dealt with and the country secured.

Development in capital market
Operators in the capital market stated that the market is expected to enjoy more liquidity inflow in 2014 due to fall in budget deficit.

Some of them, however, disagreed on the likely impact of US Federal Reserve tapering on Nigeria equities market Tola Odukoya explained that the capital market may likely suffer the negative impact of the US Fed tapering, especially the domestic bond market, even as he added that the equity market in general may face some headwinds as a result of a possible disappointing performance by banks (banking sector is still the bellwether sector in the market), the inability to really commence market making and general risk aversion by investors during the year.

Victor Ogiemwonyi said, “The risk that markets will come down on the issue of US Fed tapering alone is remote. We think that it will not adversely affect the equities in Nigeria.

The bond and money markets are more vulnerable. A large part of the foreign investments in our markets are returning “Flight Capital”, capital that left the country when things were bad.

Most of these, particularly, those invested in the equities market here will not be in a hurry to go anywhere; a $400billion market with dazzling demographics that Nigeria represent, will remain an attractive market for long term investors for a long time to come.”

Haruna Kebira of APT Securities and Funds limited noted that the market is expected to remain bullish in the first half of the year, but may likely recede towards second half of the year due to 2015 general election, “because there will be possible withdrawal of fund by foreign investors, who do not know the direction the pendulum will swing.”

Taiwo Oderinde, National Coordinator, Proactive Shareholders Association of Nigeria, PROSAN said, “Nigerian shareholders are ready to part with their monies in 2014.That is, companies are going to have access to adequate funding.

Regulators are going to come out with new globally proven innovations and ideas that will move our market forward.  For example, the shareholders Association Academy will come up with more educative programmes for Shareholders Associations in Nigeria in 2014. Lastly, Nigerian companies will come up with better score cards in 2014.

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