The Nigerian Stock Exchange (NSE) has expressed optimism that the current recovery at the stock market will be sustained. Its optimism is based on the improved macroeconomic conditions and favourable global economic outlook.
Chief Executive Officer, NSE, Mr Oscar Onyema, said the outlook for the market in the year was positive.
He spoke on Monday at the NSE head office in Lagos at a stakeholders’ briefing on the review of the market in 2019 and outlook in 2020.
He outlined that favourable domestic environment and global outlook suggest a positive outlook for the capital market in 2020 as the capital market usually mirrors the economic environment.
Aggregate year-to-date return for Nigerian equities so far this year rose to N1.35 trillion as bargain-hunters continued to drive prices of quoted shares upward. Nigerian equities had lost about N1.71 trillion in 2019, closing the year with negative average full-year return of -14.60 per cent. It had recorded negative average full-year return of -17.81 per cent in 2018.
“Domestically, market sentiments may be buoyed by a steady and stable recovery in the domestic economy, alongside continued sustainability in monetary policy. The signing into law of Nigeria’s Finance Bill 2019 and implementation of the 2020 budget may have a positive impact on companies’ earnings as well as consumer spending,” Onyema said.
He noted that the 2020 business year has started on a good note, with the benchmark index at the Exchange recording a 10.4 per cent improvement so far this year.
“We intend to work closely with our stakeholders to sustain this growth trajectory,” Onyema said.
According to him, the NSE will continue to advocate for business-friendly economic environment, working in conjunction with both the public and private sectors.
He outlined that three key factors of crude oil price and production, global economic performance and political stability and business environment will shape the Nigerian economy and also the capital market in 2020.
He pointed out that since Nigeria still remains reliant on oil production for foreign exchange reserves, the dynamics of crude oil price and production will continue to influence the capital markets and larger economy.
According to him, factors such as United States and Iran tension, oil supply shocks from Eastern Europe, Venezuela, and Libya, and progress in trade negotiations between the United States and China may exert pressure on crude oil prices in 2020.
He noted that the IMF World Economic Outlook (IMF WEO) had predicted a global growth of 3.4 per cent in 2020 based on reduced trade and geo-political tensions, and macroeconomic strain in euro area that have dampened business confidence and investment decisions.
“Enhanced focus on infrastructure renaissance and promotion of laws that will support the business environment will be key to Nigeria’s success in 2020. Nigeria moved 15 places from 146th to 131st in the latest World Bank ease of doing business report; as such the country has been tagged as one of the most improved economies in the world in terms of doing business reforms. These are positive indicators that will drive investors’ sentiment in 2020,” Onyema said.
He assured that the Exchange will continue to leverage its vast network of stakeholders while developing new strategic partnerships with the goal of delivering better products and services to its customers.
He attributed the negative performance of the market in 2019 to weak macroeconomic landscape; fiscal and monetary policy direction; underwhelming trends in foreign portfolio investments; concerns around the stability of the naira and moderate corporate earnings. All these led to a negative performance in the equity market during the year and triggered a flight to safety to the fixed income market.
He added that the negative market performance was also due to competition from the developed and emerging capital markets which saw risk-based assets priced and valued more competitively.
According to him, conducive US Fed policy enabled foreign investors to economically enhance leverage and seek investment opportunities in their home and adjacent countries, necessitating Africa’s largest economy to adjust to new economic realities.
Onyema noted that beyond the negative share price performance, the Exchange recorded many landmarks during the year including the listing of big corporates such as MTN Nigeria Communications, Airtel Africa, Skyview Aviation Holding Company (SAHCO) and the launch of the Greenwich Alpha ETF, which focused on tracking the NSE 30 Index.