The year 2021 had unprecedented effects on the Nigerian economy. Like many other countries, Nigeria had to recover from the impacts of the Covid-19 pandemic following developments in vaccine production, importation, and distribution.
Accumulated efforts from the private and public sectors helped the country sustain a positive trajectory through forex challenges, high and rising inflation, insecurity in different regions, and poor oil production numbers. However, it was no surprise that the Nigeria Bureau Of Statistics reported that the GDP grew by 0.51%, 4.01% and 4.03% in the first three quarters of 2021. The report spotlights Q3:2020 and Q3:2021 growth by 4.03% year on year, thereby mirroring the growth witnessed over four consecutive quarters.
Non-oil sectors recorded massive expansion, with the Technology sector delivering a whopping 9.66% growth rate in Q4:2021. The Telecommunications subsector especially championed growth with a 10.78% expansion, attributed to a 1.62% boost in subscriber base. The agriculture sector in Nigeria developed by 1.22% YoY, while its manufacturing counterpart recorded positive growth compared to results from the year 2020.
As the capital market slowly picks up, leading securities firm Anchoria Investment and Securities Limited, in their 2022 report, argues that although the prices of fundamentally justified stocks in the market remained low, there are predictions of an impressive reaction soon. They cited trends such as the recent acquisition of PBS licenses by Airtel with Glo and 9 Mobile soon to follow alongside the continuous rise of data as the new age currency as the country tilts towards remote work. Of course, traditional powerhouse stocks like those financial institutions remain a sure bet in 2022, they further narrated. (You can subscribe to their weekly market report here to find out more).
Anchoria Asset Management foresees more unorthodox policies from the Central Bank of Nigeria (CBN) to improve FX challenges, increasing the chances of a balance in the financial economy. Therefore, young investors must begin to consider acquiring more diversified assets to get quality investments and earn positive real returns in the market. (Subscribe to the Anchoria Eurobond Linked Note here)
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Is The Market Ripe For Investment?
Inflation rates decreased by 15.63% at the end of 2021. Still, this rate may increase in 2022 due to rising food prices, potential hikes in electricity tariffs, fuel subsidy removal, and food production innovations. HOWEVER, the CBN can elude these predictions through new and effective policies.
The Monetary Policy Committee (MPC) maintained an accommodative monetary policy that helped increase credit growth to the private sector by 19.02% YoY as of November 2021 and 17.13% YTD. While credit growth to the public sector slowed to just 5.05% YTD. The MPC which communicated its plan to adopt the wait and watch approach policy following the initial rate cut in 2020 to 11.50% may continue with its mandate.
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Anchoria Research found that the market closed Q4:2021 on a positive note by +6.07% on the Equities front. However, this development, like 2020, was driven by individual corporate actions despite the harsh conditions of the economy.
The Fixed Income Market remained strong with investor participation, following increased returns as many stockholders’ pivot from the equities space to fixed income groups. Although T-bills, OMO and bond yields ended Q4:2021 with 4.44%, 5.41%, and 11.96% returns in contrast to 7.10%, 9.93%, and 12.03% in July 2021, there was steady investor’s activity in the market.
Based on insights from Anchoria Asset Management and Anchoria Investment and Securities Limited, the market may seem volatile at first because 2022 remains a pre-election year, and investors’ sentiment has always leaned on political advocacy for developments in business activities. However, investors can still secure returns by purchasing their preferred stocks in different portfolios to reduce the risk of capital loss from price declines.
To learn more about the top-recommended stocks to watch and other capital market trends, download the full Capital Market outlook report from Anchoria Investment and Securities https://bit.ly/Anchoria2022OutlookReport.
Alternatively, you can delve deeper into how the macro and micro-economic trends might affect your portfolio or mutual fund growth, download the full Anchoria Asset Management Outlook Report and visit https://bit.ly/AnchoriaAMOutlookReport.
Written by Anchoria Asset Management and Anchoria Investment & Securities Limited