Nigeria’s bourse bullish of improved market in 2017


The Nigerian Stock Exchange (NSE) has expressed optimism on the market outlook for the 2017 financial year, as its chief executive, Mr. Oscar Onyema said the capital market is bound improve, with the economy expected to recover from with a modest GDP growth forecast of 0.6 percent.

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Addressing the capital market community during the NSE’s 2016 market recap and 2017 outlook on Thursday, Onyema said the Exchange had put modalities in place at ensuring that the recent rolled-out Federal Government’s 10-point road map at reviving the economy becomes a success.

He said the new government’s road map will definitely assist the government in navigating the economy out of the woods it has found itself.

He said as a stakeholder in the domestic economy, the NSE had put modalities in place by way of making the necessary expertise available to the government to make success of the roadmap in both the short and the long term period.

Similarly, Onyema said the Exchange was in support of the unbundling of the nation’s refinery as this will mitigate draw down on government’s spending, even as this fund could be applied appropriately on other projects.

Onyema reasoned that the unbundling of the refineries will bring about the listing of the companies on the floor of the stock market, thereby causing the equity market to have robust bottom-line.

While giving a recap of the Nigerian capital market in the past year, the NSE boss noted that the year’s recession was largely driven by decline in oil production coupled with foreign exchange liquidity challenges.

He said, “The bottoming out of crude oil prices and a drastic decline in domestic oil output curtailed crude oil export proceeds, which accounts for roughly 90 percent and 70 percent of Nigeria’s FX earnings and government revenue respectively. This resulted in foreign exchange liquidity challenges during the year, as the supply side of FX into the Central Bank of Nigeria (CBN) dropped by over 70 percent, despite heavy domestic demand.

“Accordingly, the oil price shocks and associated prolonged FX dilemma, coupled with challenges to policy implementation, drove the Nigerian economy into its first recession in over twenty (20) years by Q2’16.”

He however noted that Global capital markets experienced slowest start to the year in over a decade in 2016, as the World Federation of Exchanges (WFE) reported that value traded in cash equity markets declined by 24 percent in H1’2016.

However, he said “pre-election volatility gave way to post-election enthusiasm as advanced economies saw their capital markets rally in anticipation of stronger growth in the US buoyed by tax reforms and expansionary fiscal policies proposed by the Trump transition team. By Q4’16, advanced capital markets had picked up significant momentum, with major indexes such as the Dow Jones Industrial Average Index reaching record highs. Amid signs of a US recovery, the US Federal Reserve (the Fed) raised rates by 0.25 percent in its final meeting of the year. However, there was a contra-impact in Emerging and Developing Markets, as global investors shifted capital flows back to advanced economies in search of low price and low risk assets with increasing yields. According to the Wall Street Journal, “Global investors’ appetite for emerging-market stocks and bonds slumped to its lowest level since the global financial crisis last year (2016), with the biggest hit to inflows coming after Donald Trump’s victory in the U.S. presidential election”.

Accordingly, “foreign investors sent just $28 billion into emerging markets in 2016…90 percent lower than the average from 2010 to 2014.”

Onyema noted that notwithstanding the positive outlook in the new year owning to current indicators, the Nigerian capital market will have to do a better job at promoting its unique value proposition to both global and domestic investors.

“Monetary policy will continue to play a vital role in determining activity in the market. With forecasts for inflation expected to moderate due to the base effect, we believe that all things equal, monetary authorities will have more flexibility with respect to interest rates and FX regime. Hence good coordination between fiscal and monetary policy should result in resolution of aforementioned structural deficiencies and drive economic growth. We expect investors to continue to keep a close eye on the divergence between the interbank FX rate and other exchange rates in the country. Accordingly, a convergence of FX rates in the country and the performance of listed corporates will determine the level of market activity in the short term,” he said.

Speaking further on the outlook for the 2017 year, Onyema said the NSE will take into cognizance the ever evolving economic realities on ground, and apply an adaptive approach to strategy execution in 2017.

“In the immediate future, the NSE will focus on achieving its goal of becoming a more agile and demutualized exchange and will fast track efforts towards developing innovative products such as exchange traded derivatives to provide investors with tools to better weather economic realities in 2017. We intend to strengthen our thought leadership efforts with policymakers to drive policies that will free up the system and promote the ease of doing business in Nigeria,” he said.

By Naija247news
By Naija247news
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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