Mr. Chinenye Anyanwu is the Managing Director and CEO of Dependable Securities, a stock brokerage firm. In this interview, he gave insight into the sell-offs that engulfed the equities market on announcement of President Muhammadu Buhari as the winner of 2019 presidential election. He highlighted some of the key issues the administration should focus on to move the market forward.
By Nkiruka Nnorom
FOLLOWING the conclusion of the presidential election and announcement of the winner, what do we expect to see in the equities market in the coming months?
I think what is happening now is capital flight. People took position when the electioneering was going on and the position was mostly in anticipation of Atiku Abubakar’s victory. It was expected that with anticipated restructuring in his campaign promises, the economy will pick up.
Now that it is clear and it is known that he didn’t win, those that took position are beginning to take their money away. This will continue until a positive sign comes from the government of the day; if there is a positive sign from the government of the day, investors will react accordingly. Not until there is such a thing, the stock market will continue to slide.
Style of governance
However, even if there is no positive sign, the market has dropped to a level it will correct itself. You know the market has a level it will drop to and it begins to correct itself. So, if it drops to that level, people will begin to take position again.
Except the incumbent president changes his style of governance and something positive happens, we should expect a dull period. We should expect a period of definitely, not an upward move.
There are indications that investors who are taking flight to safety are pitching their tent in the fixed income market. For how long do you think this would continue to happen?
Those that are moving their money to fixed income are doing so in the interim as a stop gap to see how stable the equities market will turn out to be.
It is definitely not a permanent move; the return on investment is definitely nothing to compare to relative to that in the equities market.
What would be your advice to domestic retail investors that are still sitting on the sideline since the market is still jittery?
It’s a long period; it is possible for anybody to bail out. The good thing about the season we are in is that it is the earning season. So, as results are being expected, there is a level of hope that is being built by that expectation. It will go long way to stabilise the market for the period.
Zenith Bank has led the way in announcing such a good result and good payout. If others follow suit, the effect of all these things may not be felt much.
You talked about the government of the day coming up with something positive. With regards to the equities market, what are some of the areas you would want the government to focus on?
First of all, we expect that the president should tinker with the government structure. President Muhammadu Buhari governed for almost four years without changing or reshuffling ministers.
If the reshuffling happens, I doubt that present finance minister will still retain her position as the finance minister. I am also afraid that the knowledge of macro and micro economics of the people around him is as sound as it’s supposed to be. So, the people he will saddle with certain responsibilities will determine to a large extent the level of improvement that will be recorded by his administration. Also, his economic theories are somewhat archaic. His economic policy is more of protectionism.
All those things that he started with, particularly the exclusion of 41 items from accessing foreign exchange are not needed. Those things he experimented with didn’t work. A lot of things need to change and he must show that he is ready for a change.
And on the monetary side…?
On the monetary side, it is all about macro-economic policies that will suit the day.
In other climes, if you increase interest rate, you will get commensurate response, but here in Nigeria, it is not like that because our system is not fine-tuned to respond to stimuli.
When it is fine-tuned to respond to stimuli, a drop or increase of one percent in interest rate will affect the equities market either way. Again, the economic policy of the money market must not be seen as an opposite and enemy of the capital market. The money and capital are two sides of the same coin, so the two must work together to mirror the economy.
Most of the times, before now, they treat both markets as if they are independent of the other.