By Aduragbemi Omiyale
The much-anticipated 2023 general elections in Nigeria, which kick off on Saturday, February 25, may have further slowed the participation of foreign portfolio investors (FPIs) in the nation’s stock market.
However, domestic investors have filled the gap, shunning potential risks from the impacts of voter’s choices, especially in the presidential poll this weekend.
Data from the Nigerian Exchange (NGX) Limited showed that local investors are already scooping up positions in equities, helping the bourse to maintain positive momentum for the past five months.
The All-Share Index (ASI) is up 5.80 per cent already in 2023 as of the close of the market on Monday, February 20, 2023, maintaining a bullish run from September 2022. This has been driven largely by domestic investors, who currently occupy 84 per cent of total transactions conducted on the exchange.
It has been observed that foreign participation in the local bourse has so far moderated in recent years due to issues around forex liquidity and monetary policy, placing their turnover at 16 per cent, according to the December 2022 edition of the Domestic and Foreign Portfolio Investment Report of the exchange.
Analysts have commented that this is due to unimpressive yield in fixed-income securities, pushing investors to buy up fundamentally strong stocks with attractive dividend yields.
Historically, the market has typically experienced volatility during election season with some notable years, particularly the 1999 election – which saw a change from the military rule – and the 2015 election – which saw the first incumbent defeat at the polls – experiencing declines pre-election.
The positive domestic investor sentiment, according to analysts, has been driven mostly by strong earnings releases and dividend payouts announced by companies in the wake of earnings season.
However, some have advised cautious trading as the 2023 elections approach but maintained their positive outlook on dividend yields and capital appreciation in bellwether stocks.
An analyst with Parthian Securities, Azeezat Awonuga, whilst commenting on the market with CNBC Africa, said that investors are poised to hunt for gains in the stock market as the fixed income yields have moderated in recent times.
“As we anticipate earnings from the banking sector, which comprises about 60 per cent of the volume in the market and also form the bulk of the fundamentals, positive earnings will push investors to plough more funds into the market,” she stated.
Another investment research analyst from Investment One Capital Management Limited, Akosile Oluwasanmi, noted to Channels TV that uncertainties around the elections and the cash crunch in the economy could dampen investor sentiment into taking profits, but positive corporate earnings could also see investors increasing their positions.
