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Investors skeptical over rally



’We are looking for growth and as long as people are not investing, then growth will be constrained —Bismarck Rewane


Despite the early gains witnessed in the Nigerian Stock Market this year, not a few investors continue to hedge their bets as to how far they can fully let down their hair and enjoy the winds, checks by Business Hallmark have uncovered.

Perhaps many investors are still harbouring subtle fears whether it is the right time to fully return to the capital market or not. However, some others are jumping into the arena with confidence in the hope that they would reap from the gradual gains that seem to be trickling in.

In the midst of this division, the unfolding evidence is that those who are addicted to investing in the market and who are playing in the system currently are already smiling to the banks given the new lease of yields that are abounding within the market’s horizon.

Indeed, pointers are that as at today, the market has left the red zone and moved over to green horizons. More equities especially, the banking stocks are now drifting more to the North than the South. But the million Naira question is, how sustainable is the current spate of market recovery? What has changed in respect of the critical fundamentals?

Experts believe that nobody can predict the direction of market with accuracy. However, anxious observers have seen that the equities market is at the moment on a recovery trajectory.  For instance; the major bench mark, the All-share Index which has remained in the negative as at the close of business in 2019, has turned bullish.

Keen observers of the capital market have equally noticed that the All-share index has gained about 9.6 per cent in the first 8 trading days, and then climbed to 10.6 percent. As at the exact time of writing(24th January) the market has retreated slightly as its gains now stand at 9.6 per cent. However, there are mixed signals as the renewed surge is yet to attract more investors given that their confidence seems  slow in crawling back.

Market analysts are aware that the Nigerian Stock Exchange (NSE) All-Share Index recorded a leap by 9.75 per cent in the last three weeks, from 26, 842.07 points as at January 02, 2020 to close at 29,719.41 points on Friday 24, 2020 while market capitalisation gained N2.202 trillion or 16.9 per cent, from N12.970 trillion to N15.173 trillion.

Further details show that in the week ended December 31, 2019 the market closed negative  at -14.6 per cent in the red appears to have picked up this year. Its major index the NSE ASI closed the year at 26,842.07 while market capitalization stood at 12.9 trillion as December 31, 2019.

Despite the impact ofthe weak macroeconomic landscape; fiscal and monetary policy direction; underwhelming trends in Foreign Portfolio Investments; concerns around the stability of the naira, moderate corporate earnings, the early bullish signs of the market evoke optimism.

Even the respective sub-sectors that make up the market are also demonstrating an upward growth trajectory overall. For instance, the NSE 30 Index gained 10.7 per cent; up from 1180.79 points early in the year to 1307.43 basis points as at January 22, 2020. The banking subsector, the most liquid in the market gained 11.2 per cent from 355.46 points to 395.08 basis points. Similarly, the insurance subsector gained 2.6 per cent, while consumer good index retreated by -5.23 per cent from 592.24 points to 561.21 points. The oil and Gas gained 0.49 per cent, the Islamic index garnered 10.2 per cent while the Industry index moved up 16.7 per cent.

The market surge has reflected strongly in the stocks of UBA, Zenith Bank, Ecobank and others whose stock prices are on upswing as a result. For instance; G T Bank stock has surged by 9.93 percent from N29.20 per share on January 2, 2020 to N32.10 as at January 23,, 2020. Access Bank’s stock also gained 2 per cent from N10.10 early in the year to close at N10.35 per share as at January 23, 2020. Similarly, the stocks of Zenith Bank surged 17.64 per cent, Fidelity 13.8 per cent, Ecobank 16.03 per cent,FBNH 15.38 per cent and Stanbic Ibtc 6.65 per cent

Flour Mill of Nigeria enjoyed a lift by 27.96 per cent to close N22.65 per share while Dangote Cement  crawled forward by 23.16 per cent.A critical observation of the market revealed that some other stocks added value and helped to nudge the market higher.But, we ask again, how sustainable in the bullish trend?


Many investors could not hide their sadness when year 2019 crawled to an end with the market closing in the negative. Their discomfort stemmed from the fact that investment yields have not been impressive, especially the traditional investment options, save for the fixed income market. The broader Nigerian macro-economic growth also did not meet expectations. The economy has remained weak, closing the third quarter ended September 2019 at 2.8 per cent. This is a country which GDP growth hovered between 6 and 7 per cent growth before 2015.


There is every indication that 2020 might be a very difficult year for investors given the harsh macro-economic environment. Despite the N10.6 trillion budget which has just been signed into law, Industry analysts appear unanimous that the un-going trend and federal government policies are incapable to nudging the economy to any significant growth.

More worrisome is Moody’s investors’ service, a global rating agency that changed its outlook on Nigeria’s ratings to negative from stable.

Despite the discomforting ratings Moody’s however, maintained a stable outlook on Nigerian banking system. ‘’Our view reflects the banks’ resilient capital buffers and their stable deposit bases. Although Nigerian banks’ asset risk and profitability will remain key rating challenges, we expect these challenges to gradually ease in 2020 as the economy improves further,’’ the agency said.

It however, noted that the GDP projection would be well below the level required to improve Nigerian’s living standards. Fitch, an international credit rating organisation, also downgraded Nigeria’s economic outlook from stable to negative while affirming the B+ rating. Fitch stated that the downgrade of Nigeria’s economic outlook is traceable to the disruptive macroeconomic policies under the administration of President Muhammadu Buhari.

Fitch noted that the downgrade of Nigeria’s economic outlook reflects the increasing vulnerability from the current macro policy setting in Nigeria, Central Bank’s complex regulatory measures, rising country’s debt, low fiscal revenue and uncertainty in governance. Coming on the heels of Moody’s &Fitch’s troubling and gloomy ratings of the country, the World Bank believes that Nigerians living in extreme poverty may increase by more than 30 million by 2030. The bank warned that Nigeria will be home to 25 per cent of the world’s destitute people if government does not revive economic growth and create jobs. The scenario painted above should worry investors, however, no investor will pack his money and wait for improved conditions, they will still invest somehow. However, when business Hallmark went to town to seek expert opinion, there was a consensus that some sectors may prove to be better in the coming year.

Unfortunately, recent transparency international insisted that Nigeria rated very low in the fight against corruption. The country was rated 146 out of 180 and in fact two steps lower than the rating of last year. Also plaguing the country is the perception by local and international persons and organisations that the justice system especially under the current government is flawed and cannot be trusted.

These appear to have diminished that breath of life the economy would have had from starting the budget cycle in January among other seemingly positive initiatives of the government.Whereas the World Bank has put the estimated growth rate for Nigeria’s economy in 2019 at 2.2 percent with its forecast oil price at average $67 per barrel for the current year and next year, down $2 from its projections last June, Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema in his 2019 market recap, noted that the Nigerian capital market mirrored the performance of the larger economy, which, he said, continued its moderate path of recovery, growing by 2.28% (Q3’19. He however, expressed optimism that the market would grow if the right things are done even politically.

And just on Friday January 24, 2020, information trickled in that the CBN has adjusted the Cash Reserve ratio from 22.5 percent to 27.5 per cent to curtail liquidity growth.

Recently, too, the European Union and the United States of America have warned against the continued killings of innocent citizens especially Christians by the terrorist group, the Boko Haram sect and the Herdsmen.These discomforting stories may scar investors especially foreign ones whose resources most of the times help to lift the market. The dilemma seems to have shaped the opinions of analysts and market observers as many of them believe the economy cannot grow without political stability.

Recently, about seven companies namely Skye Bank, Fortis Microfinance Bank, First Aluminum, Newrest, Diamond Bank, Dangote Flour and Great Nigeria Insurance delisted in 2019. How would the equities market grow if there is no conducive macro –economic environment? An investor asked.

‘’We are looking for growth and as long as people are not investing, then growth will be constrained.  And then you have to look at what are the constraints to growth, what are the constraints to investments? Then it becomes easier for you to achieve the desired objectives,’’ said Bismarck Rewane of Financial Derivatives Company Limited.

‘’Anything that will increase productivity and output will push the economy in the right direction. Apart from that, yes, some of the structural problem will still remain because some of them have political implications. So I am not expecting any magic wand but these three things I have told you, cost effective tariffs, releasing idle power into the system is a game changer’’, He added.

Emeka Madubuike, President Association of Stock Broking Houses of Nigeria, ASHON, reckons that the economy and the capital market have a relationship given that booming and bearish economy exercise different impacts on the market.

Madubuike who observes that the macro-economic environment is looking up, says it is also eliciting corresponding response from the capital market.

“Their fundamentals are becoming stronger. With the budget signed into law, we would see a stable result by third quarter against the full year 2019 which would ultimately spur market rebound. “Again, we will have stable economy for the next three years from 2019 and no election activity again that may drag the market down. However, if government fails to initiate new reforms to drive economic growth, we may not see meaningful and sustainable growth,” said Chief operating officer of Investdata Consulting Limited, Ambrose Omodion .

Head, Securities Dealing Desk, Golden Securities Limited, Mr. Gbolaham Bello, Head, Securities Dealing Desk, Gilded Securities ltd, reckons that the Central Bank of Nigeria (CBN) insistence on buoying the economy with the 65 per cent Loan to Deposit ratio by banks could liquefy the system and redirect liquidity to the equities market.

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