by Thisday Newspapers
The delay by President Muhammadu Buhari in appointing members of federal cabinet has been impacting negatively on the Nigerian equities market and has led to a dip of N823 billion in the value of the market between when he took over and last Friday.
Investors had reacted positively to the victory of Buhari in March as market rallied for 10 straight days, longest streak of gains since December 2012.
The market added N1.8 trillion in the first four days of that rally. The market,which dipped from N11.478 trillion at the beginning of the year to N10.718 trillion in Fedraury due to pre elections apprehensions, surged above N11 trillion after the presidential election. And on the eve of the inauguration of Buhari’s administration, the market stood at N11.659 trillion.
However, the delay in the appointment of ministers after over 40 days in office, is discouraging equity investors, who are waiting to know the policy direction of the Buhari’s government before taking investment decisions.
Consequently, the stock market has dipped from N11.659 trillion, on the eve of inauguration to N10.836 trillion last Friday, translating into about seven per cent decline.
“Given the pedigree of President Buhari, his victory at polls was enthusiastically received. Expectations have been high. But the non appointment of key government officials, including ministers, has dampened confidence of many investors. That is why the market has been sluggish.As you know, investing in stocks is investing in the future of those companies. But now, it is difficult to tell the policy direction. That is why investors are reluctant to invest for now. I believe by the time the government appoints ministers and make its policy direction known, the market will pick up again,” a stockbroker told THISDAY at the week end.
Reviewing the performance of the market in the month of June, analysts at FSDH Group said the equity market continued its down trend.
The decrease in the market performance was due to the overwhelming influence of the difficult macroeconomic environment which dampened investors’ sentiments. The Nigerian Stock Exchange All Share Index (NSE ASI) depreciated by 2.49 per cent a on a month-on- month basis to close at 33,456.83 points. The market capitalisation also fell by 2.04 per cent to close at N11.42 trillion,” they said.
According to them, there has been a general weakness in investors’ sentiments arising from the general macroeconomic conditions that have worsened the profitability of quoted companies at the bourse.
“A cursory look at the movements in the individual sectoral indices shows that the only month-on-month gain was recorded in the NSE Industrial Index with a gain of 1.99 per cent, as some stocks in the Index continue to offer upward potential in their prices. All other sectoral indices recorded month-on-month losses. The highest month-on-month loss was recorded in the NSE Banking Index with a loss of 6.03 per cent followed by the Insurance Index with a loss of 3.51 per cent,” FSDH said.
Looking ahead, they stated that they did not expect a major improvement in the earnings of the quoted companies in Q2 2015, adding “The market may drop further in the month of July. The policy direction of the current administration may set the path that the equity market would follow in the short term.”
The analysts advised that speculators might take a short position, while long term investors might maintain a hold position.
“The historical performance of the equity market did not follow a particular trend. Going by the current development in the economy we expect the market to follow the July 2014 trend in July 2015,” they declared.