The Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), Mr Sam Onukwue, has identified some factors that will drive activities in the Nigerian financial market.
Onukwue, who stated this in an interview with Nairametrics, said it became necessary to discuss the topic as investors begin to speculate the likely implications the upcoming general elections would have on investment decisions.
Major drivers: Onukwue specifically listed the following as the factors that will determine the investment environment this year:
- Securities challenges
- Inflation rate
- Taxation of market instruments
- A disincentive to investors
- Government’s management of debt
- Funding of budget deficit
- Privatization of moribund parastatals
- Successful removal of fuel subsidy
- General stability of monetary policy amongst others
Impact of MPR: In his review of the market for last year, he noted that the above 20% gain recorded by NGX was commendable.
He added that the market would have earned higher but for the incessant review of the Monetary Policy Rate (MPR), rising inflation rate and an inconsistent exchange rate that characterized investment activities in the review period.
He however expressed optimism that a more stable monetary policy environment will enhance investment opportunities. He said:
- “The financial market was unstable for the larger part of 2022 as some fundamental decisions were taken by the government that impacted the market. The constant movement of the Monetary Policy Rate (MPR), forced investors to look for higher interest margins.
- “Inflation galloped in the period and people were looking for real value. Exchange Rate also constituted a challenge as foreign portfolio investors abandoned the market while local investors dominated the market. On one hand, we can say local investors are developing confidence in the market but on the other, foreign investors left because they were losing money.
- “Global implications of the Russian invasion of Ukraine disrupted economic activities. But the market didn’t do badly despite the challenges. The impending presidential election will have significant impacts in terms of investor expectations and uncertainties. However, given the good performances of many companies in the third quarter, they may perform better. We have seen a slight decline in the inflation rate, for the first time has 11 years. We hope this will be sustained.
- “I believe that many people still want to do business with Nigeria. What they need is an investor-friendly monetary policy environment. But the incoming administration should address issues such as security, inflation rate, debt servicing, removal of petroleum subsidy, management of exchange rate, privatization of parastatals such as NNPC and get it listed on a securities market rather than direct sale to core investors. We have seen a huge gap in this year’s budget and hope the Government shall leverage the capital market to fund the budget deficit.”