By OKEY ONYENWEAKU
Whereas the Nigerian equities market gained 0.54 per cent at the close of trading on Friday 20th March 2020 at the major index with, the All share index (ASI) closing higher from its earlier 22,078.58 points on Thursday to 22,198.43 basis points, investors are still jittery and appear not to be hopeful.
This market volatility has been very discomforting especially in this current period when the whole earth is taking a hit. In the just-ended week overall, the market plunged by 2.2 per cent as the ASI dropped from 22,705.19 points on Monday, March 16, 2020, to 22,198.43 at the close of the week. The market capitalization followed in the same trend as it lost N240billion in the same one week span.
Market observers have also noticed that Month-to-date (MtD), the stock market has decreased by 15.33percent while in this year only, it has dropped by 17.30percent.
The market whose capitalization peaked at N15.173trn by January 10, 2020, has accordingly now suffered a quite huge setback as the market capitalization had relapsed to 11.568 trillion as at March 20.
The continuous decline of the market could be attributed to the effect of the fast-spreading Coronavirus which had emanated from China and has sent panic all over the world, prompting the closure of all manner businesses that could bring many persons in contact with others.
These range from airlines to schools, shops, factories, pharmaceutical firms, restaurants, churches, mosques and many more public places have been shut-down. The most hit countries in the firing line of the deadly virus at the moment are China, Italy, other European Countries, and the USA among several other major developed economies. The death toll from infected cases continues to increase by the day as Covid 19 is persistent, ravaging and spreading.
Indeed, the Coronavirus (COVID-19) has sent the world reeling and witnessing an unprecedented health situation and global uncertainty. Back here in Africa, though infection rates are still few and far between, the threat remains quite high:
“Coronavirus is rattling the healthcare, financial and economic systems around the world. Although, the impact on Africa countries initially seemed to be limited to the external account and financial markets, which are considered secondary due to net foreign capital reversals.
“However, with an increasing number of cases in the continent, monetary and fiscal authorities are forced to double down on their efforts to curb the spread of the virus, as the primary impact of the outbreak is set to add an extra layer of domestic challenge to the growing problem”, said United Capital research analysts in their March 20 note.
There is also the negative effect on African crude oil-producing nations like Nigeria and Angola, on account of the abysmally low price of crude which closed at the weekend at the dismal market price of $26.98.
Financial analysts, however, believe that the associated battle for supremacy between Saudi Arabia and Russia, which has caused a glut in the crude oil market, making the price to tumble to $26.98 on Friday is a related factor. Nevertheless, the price of crude is at its lowest in over 18 years even as it also has very clear negative implications for the Nigerian economy and the capital market which has for years now been at the receiving end of unfavourable macro-economic environmental circumstances.
Whereas no expert can predict the market with accuracy, analysts sometimes are able to hazard the picking of some stocks with potentials to reward investors with impressive returns in the short to long term. In the midst of complaints about the shortcomings in the management of the economy, stocks like Dangote Cement Plc, GTBank, Nestle Nigeria, Fidelity, UBA among others have been fingered for investment.
However, many investors cannot hide their sadness as investment yields continue to grow thinner by the day. Their discomfort stems from the fact that investment yields have not been impressive, especially from the traditional investment options, except perhaps the fixed income market. Overall, there is a consensus that Nigeria’s economic growth has not to meet the required expectations. The economy has remained weak, closing the year 2019 at 2.55 per cent. This is the same country in which GDP growth had hovered between 6 and 7 per cent before 2015. With all of the above, there is every indication that 2020 might be a very difficult year for investors given the harsh macro-economic environment. But the hopes of some, however, are that something more positive could yet give. We pray so.