With just days left till the 2023 general election, the harsh economic situation in Nigeria has become exacerbated by the CBN’s naira re-design policy which has thrown the country into a huge crisis due to cash scarcity.
Also, fuel scarcity, though currently easing off after much discomfort, has contributed to worsening the economic realities of millions of Nigerians. There is no doubt that many people will be going to the polls this weekend feeling depressed and frustrated.
The Nigerian equities market is not spared from the depressing situation the country has found itself, as the CBN policy is capable of eroding investors ‘confidence if not properly managed.
This is in addition to the fact that investors’ sentiment is usually weak during election periods, even as they seek to reduce their market exposure. The intensity of the impact is usually a function of the degree of political tension and uncertainty generated by political activities.
The stock prices may still be subdued below real market value due to the political fever and the associated uncertainties in the next few days before and after the election.
Depressed economic standpoint: Mr. David Adonri, the Executive Vice Chairman of Hicap Securities Limited, Mr. David Adonri, said that Nigeria’s depressed economy may weaken demand for stocks due to uncertainty and market volatility. He said:
- “We are approaching the election from very depressed economic standpoints, which may adversely affect the impact of demand for shares. This period- before and during elections – is a period that is beset with uncertainties and market hate uncertainties.
- “We might have a market that is weak in demand and supply. And after the election, there can be post-election rebounds if the outcome of the election is credible and expected but if the reverse is the case, there will be market depression.”
Projected impact of election jitters: Other market operators who spoke to Nairametrics noted that if the election is free and fair and the preferred candidate emerges victorious this Saturday, then by Monday the stock market would be on a bullish route. This will, in turn, help investors to double their gains, especially those who invested in good fundamental and dividend-paying stocks.
But if the reverse is the case and the election is marred with crisis and malpractices, the equity market would turn bearish, with investors losing a considerable chuck of their investments.
The President of the New Dimension Shareholders Association, Mr. Patrick Ajudua, said that the election jitters in the mind of both foreign and domestic investors will make them stay on the sideline and watch development in the meantime. He said:
- “It is advisable not to take a position and know where the pendulum will swing to, not minding that the front runners are all capital market-friendly. Investors have to weigh risks in order not to miscalculate,” he said.
Presidential candidates are pro-market: Meanwhile, the Chief Executive Office of Wyoming Capital and Partners, Mr. Tajudeen Olayinka, pointed out that the three main presidential contenders are pro-market. To this end, the emergence of any one of them as President will be beneficial to the capital market.
He added that the economic reforms that will take place in 2023 will revolve around the capacity of the banking sector to act as a catalyst. Therefore, banking stocks will become the toast of the market, going forward.
- “This is also with the hope that one of the three leading presidential candidates, Atiku Abubakar, Asiwaju Bola Tinubu, and Peter Obi becomes the President on May 29, 2023, for one simple reason, the three leading presidential candidates are pro-market,” he said.
He noted that except there is violence, the outlook for the market is positive.
Opportunities exist in the market: The Managing Director of Crane Securities Limited, Mr. Mike Eze, noted that the fact that the election is coming up does not mean there are no opportunities in the market. He said:
- “I think it is a good time to buy. So, you don’t have to wait until everybody is coming in before you also come in because, at that time, you might not get a fair valuation. For me, there is, indeed, an opportunity in the market and investors should take a position now.”
What you should know: Meanwhile, the Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, told Nairametrics that a fundamental shift has happened in the NGX in the last few years. He said:
- “We now have more local institutions and retail investors in the market than foreign portfolio investors. The reverse used to be the case, this shift has naturally reduced volatility in stock prices as the locals are likely to have more faith in the local market than foreigners. That’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment. My prognosis is that while we might see a slowdown as we move closer to the elections we are unlikely to see a significant decline in stock prices mainly because of what I have highlighted. However, if the election were to degenerate into chaos then the scenario might change significantly.”
