By Dipo Olowookere
An expert in capital market, Dr Timi Olubiyi, has said the current prices of stocks at the Nigerian Stock Exchange (NSE) are “grossly undervalued.”
Mr Olubiyi made this disclosure in an opinion article he wrote and was published on Business Post on Sunday.
The chartered member of the Chartered Institute for Securities and Investment (CISI) and financial literacy specialist said most stocks on the exchange were far below their real worth and book value.
“Equities are grossly undervalued at current prices; most stocks are far below their real worth and book value.
“Also, the current valuations already offer opportunities to those who want to position for the long-term.
“Essentially, hedging against inflation is achievable with the current equity prices if held over in the long-term,” Mr Olubiyi said in the article.
He said in the first quarter of 2020, the local stock exchange closed in the red territory in terms of performance with a negative return of 20.65 percent in contrast to a negative return of 1.24 percent in the corresponding period of 2019.
In the period under consideration, the market capitalisation of the NSE, which represents the market value of all listed companies, lost about N2 trillion.
But in April 2020, when the lockdown imposed on Lagos, Abuja and Ogun State became fully effective, the market surprisingly appreciated by 8.08 percent month-on-month.
The All-Share Index (ASI), which opened the month at 21,300.47 points, closed at 23,021.01 points at the end of the month, while the market value increased by N896 billion to N11.997 trillion from the opening value of N11.101 trillion.
In May 2020, the market on month-on-month performance closed at 9.76 percent as against 8.08 percent recorded in April 2020.
Mr Olubiyi attributed the positive performance of the exchange to investors’ bargain hunting even though most of the trades were executed remotely.
At an event held few weeks ago, the Chief Executive Officer of the NSE, Mr Oscar Onyema, said during the lockdown, which was eased in early June, domestic investors took over the market after the exit of offshore traders, who used to dominate transactions.
But Mr Olubiyi, who is prolific investment coach and an entrepreneurship and small business management expert, said he foresees “a return of foreign investors when a bit of stability and flattening of the curve of the pandemic has been achieved globally particularly in Nigeria.”
However, he advised regulators and government “to improve policies and laws to promote foreign investors and inward foreign direct investments (FDIs) because it will eventually stimulate economic development.”
According to him, “The policy of ease of doing business in Nigeria can be upgraded to include foreign portfolio investment policy options.
“Furthermore, Foreign Direct Investment (FDI)-incentives (tax-related) to considerably increase foreign participation in our capital market ecosystem needs to reflect in the post-COVID recovery policy.”
In the past days, especially in June, the market has not been able to replicate its astonishing performance when business activities were paused in the country due to the virus, which has infected over 20,000 persons in almost four months and claimed 518 lives since February 27, 2020, when Nigeria recorded its first case.
