Trading Floor of the Nigerian Stock Exchange

Stock traders observe further gloom in bearish Nigerian capital market

*Benchmark index slides as focus shifts to Nigerian debt market, as end of results season leaves stocks lacking positive catalysts

Emmanuel Akosile | ConsumerConnect

Nigerian stocks look unlikely to shake off their poor start to 2021 anytime soon, with an investor preference for returns available in the local debt market set to persist, according to analysts and investors.

It was gathered the benchmark Nigeria Stock Exchange (NSE) All Share Index (ASI) slipped 3% in the first quarter and the conclusion of a positive annual reporting season leaves few incentives to tempt investors to bet on slightly higher returns from equities compared with the less risky government fixed-income market, said Ayodeji Ebo, Head of Retail Investment at Chapel Hill Denham, in Lagos.

Ebo told Bloomberg on phone that “the market will be bearish in the first half, and after this result season we expect a further depression because there will be no further catalysts.

“If I can get a one-year Treasury bill at 7% now, why will I take a risk of 8 or 9%?” A 50% jump in the key Nigerian index in 2020 has failed to curb the move away from equities. Figures from Nigeria’s Securities and Exchange Commission (SEC) showed that more than 90% of the investment pool overseen by the country’s asset management industry is in money market and bond funds.

said Ayodeji Ajilore at Meristem Securities.

Ayodeji Ajilore of Meristem Securities stated that market participants, especially institutional pension fund administrations, have been rebalancing their portfolios into safer alternatives,

Recent weakness means that Nigerian stocks are trading at a widening discount to their peers in other frontier markets, report said.

However, don’t expect those valuations to tempt foreign investors to step in and take the place of absent locals, said Emmanuel Adeleke, an analyst at ARM Investment Managers.

Non-residents have been discouraged by a shortage of hard currency and this will remain an overhang for equities, said the analyst.

Adeleke stated: “Liquidity has been thinning out and that will also impact the stock market, as we expect yields to go higher for the rest for this year.

“I don’t see any major fundamentals that would really cause huge inflows back into our market ─ the major concerns of foreign guys are still there.”

The benchmark index extended its losing streak to a fourth day, dropping 0.4% by the close in Lagos. An index of 10 leading banks slipped 2 percent, according to report.

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