Economy
Consider These Critical Risks Before Investing in Stocks This Year
By Dipo Olowookere
Investing in stocks is a profitable business if you understand the market very well, but when you fail to know trends, you might bite your fingers very hard like some did in 2008 during the market crash.
Next year, Nigerians head to the polls to elect new leaders and representatives and the polity is already building up.
Already, happenings in the political scene have been hitting the stock market and as the year runs out, more effect would be felt by the market.
However, analysts at Zedcrest Research have highlighted some political risks that may have huge negative effect on the Nigerian stock market and they are presented below.
The Fixed Income market has been on a rally of late, hinged on renewed interests from both local and offshore clients, due to investors’ expectation of further moderation in inflation rates and a tilt to a more accommodative monetary stance by the CBN, with the recent reduction in its spate of OMO issuances.
Foreign investors have also been attracted by the broader stability in the country’s macro-economic environment, largely hinged on positive developments in oil prices and relative stability in its FX Market.
We however note that there exists some downside risk factors in the broader political and economic space which could spook the wheels of the recent momentum in the markets. The key risk being a possibility of capital reversals by FPI’s in reaction to political risk factors ahead of the 2019 General elections.
Major Risk Factors
1.) Delay in Budget Passage
The delay in the passage of the 2018 budget is being felt negatively as the budget is required by public and private sector stakeholders to plan and manage their economic activities. The 2018 budget which was put at N8.612 trillion and presented to the National Assembly by President Muhammadu Buhari on Nov. 7, 2017, was tagged “Budget of Consolidation’’, but the absence of a budget calendar and lack of coordination amongst the executive and legislature have been the major causes of the delay. While we expect the issues around the budget delay to be resolved soon, a continued delay would however send signals of instability and uncertainty to prospective local and offshore investors.
2.) Regional Conflicts
The Nigerian socio-political climate has been beset by several conflicts in recent times. Notable amongst these include the recent Shiite protests in which large number of supporters of the Shite Leader El-Zakzaky stormed the state capital to protest the continued detention of their Leader. We have also witnessed recent attacks by the Boko-haram sect in the north eastern region which has caused some angst amongst members of the International community.
Most Notable amongst these conflicts however remains the continued killings by rampaging herdsmen across most of the North central and some southern states of the country. We fear that if these conflicts are not properly handled by the Government, they may result in heightened levels of insecurity and an escalation of tensions ahead of the upcoming General elections.
a.) Shiite Protests
There has been escalating tensions in recent times from Members of the Islamic Movement of Nigeria (IMN) in protest of the continued detention of their leader, Ibrahim El-Zakzaky, whom the Nigerian government has kept in custody for over two years, without trial and despite court orders for his release. The protests, which started peacefully on Monday and Tuesday last week turned violent after police forcefully dispersed the protesters. We fear that if this situation is not carefully handled, it might degenerate into a more serious security concern.
b.) Boko-haram Insurgency
Despite claims by the Federal Government of a complete subjugation of the Boko-haram Militant Sect, we have witnessed recent spate of attacks from the terrorist group, which has once again renewed fears of a debilitating security situation in the North-eastern part of the country.
c.) Herdsmen Killings
The Seemingly intractable killings by Fulani herdsmen across most of the Middle belt and southern states, has been one of the most controversial issues facing the current administration, which has drawn a lot of criticisms from both local and foreign governments, politicians and human rights activists. Of utmost concern however is the Federal Government’s seeming inability to find a lasting solution to the menace. We fear that a lack of decisive action by the FGN may result in increased tensions as members of the affected communities may be forced to defend themselves from any future attacks.
3.) Inflationary Threats
Most experts have said that the inflation target of the Central Bank of Nigeria (CBN) would not be feasible, due to the downside risks occasioned by electioneering spending and implementation of minimum wage. Inflationary pressures are likely to resume in the third quarter of the year on the back of waning base effect, increased electioneering spending and the implementation of minimum wage by government.
RECOMMENDATION:
We believe the aforementioned risk factors should be critically monitored by investors, as they may portend for significant reversals in offshore capital flows and an uptrend in fixed income yields if they worsen or do crystallize. We consequently advise investors to exercise caution in their investments ahead of the 2019 General elections, whilst advising a tilt to the shorter end of the Naira yield curve for risk averse investors.
By Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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