Overview of Nigerian stock prices
As at September 2021, the Nigerian stock market is said to be facing several challenges and is plagued by declines in share values and a drop in investor confidence. This follows numerous reports from some of the key players in the finance sector, who have painted a somewhat grim overview of the Nigerian stock market. As an investor or trader that is active in the Nigerian Stock Exchange, or even the FTSE 100 and other major trading markets, there are certain factors to remain mindful of in order to guide your decisions.
It is worth noting that in recent months, some experts have cautioned against investing in Nigerian stocks in the long-term. Due to the fact that a stock market is highly impacted by and dependent on the state of the country’s economy, and with Nigeria said to have several areas of improvements in that aspect, investing in its markets carries a relatively higher level of risk than most other countries.
Influences on stock price movement
In most other countries, some commentators advise buying when stocks have dropped as they will most likely be more lucrative in the future, therefore, making it a worthwhile investment. Unfortunately, that is not the case with Nigeria, as many believe that it would be foolish to believe in that narrative under the country’s current circumstances. Naysayers believe that you will most likely lose your capital investment and gain nothing from doing so. To expand on this notion, below are just some of the key factors that influence stock price movement, which have been a cause for concern in Nigeria.
The ability to attract investors, both local and foreign, is key to the growth of any country’s economy. Foreign investment often gives a much-needed boost to the country’s businesses, entrepreneurial ventures, employment and overall economy. However, Nigeria is said to be in a somewhat unfavourable position currently with regards to this. A drop in investor confidence is hugely attributed to the negative movement of the country’s stock prices.
More often than not, currency fluctuations suggest instability within the country and tend to deter investors from making any commitments. This is mostly due to the fact that currency fluctuations ultimately have an impact on the value of one’s portfolio or interests within that country. Of late, there has been much risk associated with investing in Nigeria because of frequent devaluations and instability, therefore, providing no real motivation and reassurance to current and potential investors.
State of local companies
Perhaps one of the more obvious and direct influences on stock price movement is the state of local companies and how they are performing. High-performing companies will undoubtedly attract more investors because of the potential they possess of providing value and a satisfactory return on investment. In the case of Nigeria, unfortunately, there have been allegations of insider trading that goes unpunished, lack of accountability within companies, and general reckless behaviour and operations that supposedly continue, which has heavily impacted investor confidence. In recent years, reports suggest that billions have been lost in stocks and never recovered, which would provide sufficient reason for why some may be rather skeptical of pursuing the Nigerian stock market.