By Dipo Olowookere
The Nigerian Stock Exchange (NSE) performed woefully in 2018 thanks to the anxiety caused by political happenings in the country ahead of the general elections in 2019.
Several events shaped the state of the stock market last year including the trial of the Senate President, Mr Bukola Saraki; the defections of politician, especially from the ruling All Progressives Congress (APC) to the main opposition party, the Peoples Democratic Party (PDP); the warning by a foreign media platform that a second term for President Muhammadu Buhari could spell doom for Nigeria’s economy from 2019; the raising of rates by the United States; the China-US trade tensions; the drop in oil price; and others.
The local bourse, which ended 2017 as the second best in the world with over 40 percent growth, closed 2018 with a decline of over 17 percent.
After the January 2018 bull run, the market struggled thereafter as a result of fears by investors, especially the foreign portfolio investors, who were exiting in droves.
Already in this year, the nation’s bourse is yet to record its first gain, with the year-to-date loss at 2.10 percent as at the close of business on Thursday (yesterday).
In their market expectations report for 2019, analysts at Financial Derivatives Company (FDC) said investors should prepare for the worst this year.
However, they opined that things might get better if the nation record violence-free general elections taking place in few months’ time, adding that earnings season in the third quarter of 2019 will drive valuation of stocks at the market.
The company’s analysts said in the first quarter of this year, investors should expect the persistence of the bearish market as political fracas intensifies, forcing FPI outflow to further push NSE All-Share Index (ASI) south.
They said that in the second quarter, the market index will reach a low point, but will pick up on the back of a violence free handover.
In the third quarter of the year, there would be a gradual restoration of investor confidence, increasing market activities, increasing FPI inflows and drive in the valuation of stocks on the back of earnings season.
In the fourth quarter of the year, there would be further increased investors confidence, positive market performance driven by increasing demand, while MTN likely to have completed listing process.
However, it was stressed that the local stock market would reverse negative trend after the elections, while more companies will approach the debt market to raise fresh funds to boost their operations.
Already, Access Bank is planning to raise fresh capital in the first quarter of 2019 through rights issue as its hopes to complete the acquisition of Diamond Bank by the end of the first half of 2019.
Concluding, FDC analysts said 2019 will be an interesting year with four distinct parts: H1’19 would be solely concentrated on the election and its fallouts; election outcome could swing in any direction like a boycott, run off or conflicts; focus on economic policies and initiatives would begin by H2’19; and currency adjustment is likely to occur by 2019-end.
Adedapo Adesanya