Key highlights
- Some capital operators have expressed mixed feelings over 2023.
- Some believe that uncertain economic policies could disrupt market activities.
- The general elections could portend negative impacts on the market.
- Panic sell-offs by more foreign investors are expected.
The Nigerian stock market ended 2022 on an impressive note as investors increased their buying pressure, especially on blue-chip stocks.
This is despite the fact that the global economic landscape was confronted with turbulent headwinds, arising substantially from the Russia-Ukraine war.
In the aftermath, the Nigerian economy was characterized by rising inflation – now 21.47%, rising interest rates with MPR now at 15.5%, and a depreciating foreign exchange rate which currently hovers around N741/$ in the parallel market.
Overview of market performance: Available statistics seen by Nairametrics showed that the All-Share Index opened the trading year at 42.716.44 index points and closed the year at 51.251.06 points, gaining 8,534.64 basis points or 19.98%.
NGX Oil and Gas was the best performer has gained 34.60%. This was followed by NGX Industrial with a gain of +19.67%
Further analysis revealed that the NGX closed with a market capitalisation of N27.915 trillion, up from N22.296 trillion market capitalisation at the beginning of 2022.
However, despite the impressive performance of the local bourse, some operators in the market have expressed mixed feelings over 2023. Highlighted below are some of their opinions.
Mixed feelings and uncertainties The Chief Executive Office of Wyoming Capital and Partners, Mr Tajudeen Olayinka, told Nairametrics that given that 2023 will be a year of two administrations with a possible different economic focus, it is difficult to predict the exact behaviour of the market in 2023 at this time. As such, it’s hard to predict how the economy will affect the market.
He however noted that some fundamentally strong stocks in the Banking sector, Agriculture, Consumer goods, Telecoms and Industrial goods like cement will do much better than others.
- “My expectations of 2023 on the capital market is that of mixed feelings, as there could be associated challenges in the debt capital market that could trigger a spike in yield curve because of N23 trillion securitized ‘Ways and Means’ Advances by Federal Government. That will become an integral part of public debts in 2023, given that CBN will need to systematically release its holdings of securitized ‘Ways and Means’ to the market, to regain the most desired liquidity.
- This will possibly unsettle activities in both debt and equity markets. This is why it is difficult to predict the exact behaviour of the market in 2023,” he said.
Price adjustments will continue: The Managing Director of Crane Securities Limited, Mr Mike Eze, also told Nairmetrics that the price adjustment mechanism that the market is currently experiencing will continue during the first quarter of 2023 and that will make the market attractive.
- He noted that most results particularly the banking results would come in the first quarter and investors interested in dividends will swoop on the stocks.
- He added that it is likely that investors will take a position to reap the dividend these companies will declare during the quarter.
Politics will affect stock prices: Speaking further, Eze noted that politics will also affect the prices of stocks as politicians and institutional investors who may be sponsors of elective positions will offload early in January to have cash for their campaigns.
Most astute investors are waiting for this opportunity to take a position with the hope that this category of investors will offload to finance the electioneering campaigns.
- “I think this will help to depress prices of shares which will lead prices to come down on the second week of January, the prices will thereafter appreciate towards the end of January,” he said.
Panic sales by foreign investors: Eze noted further that panic sales on the part of the foreign investor will also be witnessed, as most foreign investors will sell and run back to their country because of election jittery.
- “But if the elections are conducted on a free and fair basis, stability will return after the election and these investors will embrace the market again,” he said.
Positive sentiments are expected: Mr Oluwole Ololade Adeosun, the President and Chairman of the Council of Chartered Institute of Stockbrokers, said given the underlying dire macroeconomic context, the Nigerian capital market has performed very well in 2022. If the country can sail through the election storms in February, we should expect a better year for the market in 2023.
Impact of the Russia-Ukraine war: Also speaking to Nairametrics was the Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwe, who said that the shocks from the Russia Ukraine war will continue to be felt in Nigeria, as the cost of wheat and other commodities usually exported by these countries will affect the Nigerian economy.
He added that global inflation, increase in interest rates, global recession, and reduction in purchasing power are all features of 2022 and beyond which ASHON believe would persistently have impacts and shocks on the Nigerian economy.
Increase in interest rates: Given insights for the Nigerian Exchange in 2023, Onukwue said the continued increase in interest rates will further affect the stock market as investors will turn to higher yields of investible instruments.
He added that the Oil and Gas industry will continue to thrive with the expected increase in international oil prices while the Banking Sector in Nigeria will continue to flourish. The growth of electronic transactions would further improve bottom lines.
According to him, the FMCG industry may struggle due to persistent inflation, and the reduction in purchasing power of consumers while foreign Portfolio Managers and Investors will maintain a “wait and see” until after the 2023 elections.
