Analysts Forecast Positive Equities Market Trend Despite Elections

Investment experts from Parthian Partners have expressed confidence in the Nigerian equities market notwithstanding the uncertainties surrounding the 2023 elections.

On his part, the head of Investment Research, Parthian Securities, Oluwaseun Dosunmu said, the equities market, dominated by domestic investors, would remain resilient this year despite the trend of a market dip which usually occur in an election year.

Dosunmu said this at the bi-monthly forum of the Finance Correspondents Association of Nigeria ( FICAN), where he spoke on ‘Assessing Nigeria’s Financial Sector and Outlook for the Economy in 2023.’

He believes that since the equities market is primarily dominated by domestic investors, the  space is exempted from capital flight and other global market volatilities.

He said: “in 2019, our market was largely driven by domestic players because the foreign investor who used to drive our markets decided to leave and not come back in the same quantity that they left, which means that domestic Institutional players like the pension fund administrators (PFAs) and the likes are dominant in the market.

“The interesting thing is that if the domestic players are moving the market, that means the markets would not be subject to foreign shocks. It is a good thing and it also has its negative side but a benefit is that whenever anything happens in the global economy space the impact in our market is always minimal.”

While this year is an election year, he added that, “and if you look at the pattern, historically, in every election year, you would recall that in 2019, the market was negative. From the start of the year, we had only three months in the whole year that closed the positive, the whole of 2019. But that is not the case in this election year.”

He emphasised that, the narrative has changed, and the focus for investors in 2023 would be on specific sectors  that will actually give them the kind of return that they want.

On her part, the head, Global Markets at Parthian Partners, Ronke Akinyemi, noted that, while the removal of subsidy will be positive for the government, the process has to be gradual.

She, however, alluded to the fact that while the removal of fuel subsidy would lead to an improvement in foreign reserves of the country and reduce the burden on the fiscal side, it will also lead to an increased cost of living in the country.

“The impact of subsidy removal will be an increased cost of living because at the moment we are buying fuel expensively. We know how this has affected food prices. How this has affected transportation costs.

“So, we expect that these things will happen. If the subsidy  is removed, there is likely going to be increased social unrest.

However, we have a recommendation that even if the subsidy is removed or when the subsidy is removed, it should be staggered as opposed to removing it 100 per cent. So, let’s say 25 per cent, wait a few months see how that pans out, take out more so that the effect is not fully felt by the most vulnerable even though it will be fully felt. Because it is staggered, it sort of prepares them for what is ahead,” she pointed out.