Nigerian Stock Market Set To Rebound In 2020

However, analysts are optimistic about the year 2020 and you should too. Their optimism is first as a result of the developments in the fixed income and money market space.

The Nigerian Stock Market in the past few years has had its share of ups and downs. As listed companies tried to deal with ensuring their fundamentals were strong enough to pay good dividends and ensure growth, they also had to deal with the market forces that were not entirely favourable.

In the years 2018 and 2019, gains from the market were not as strong as they could have been as they were curtailed by an overall market dip. The first quarter of 2019 was plagued with a dip that was attributed to political risks.

As a result of this, there was an overall bearish trend. Investors sought out ways to be a little safe, choosing to purchase equities with multiplier effects on the rise in many performance indicators. This continued until the policy of the Central Bank of Nigeria on Open Market Operations (OMO) crashed yields on fixed-income securities.

However, analysts are optimistic about the year 2020 and you should too. Their optimism is first as a result of the developments in the fixed income and money market space.

The trend of low-interest rates in the money market from around 15% to as low as 7% has also made the money market unfavorable as investors are now left with negative returns with inflation at 12%. In order for individuals not to lose the value of their investments, more investors will move to the stock market.

A good sign is that the 2020 budget was approved in record time and this means that funds will generally start being mobilized for developmental projects. There are also a number of monetary policies that have been initiated to stimulate economic activity.

According to FSDH Research:

“We expect the various monetary policies the Central Bank of Nigeria (CBN) initiated to boost economic activity and lead to increased liquidity that can flow to the financial market. This assumption is based on the availability of complementary fiscal measures that will de-risk the economy, the absence of which may limit the ability of the monetary policies to achieve the desired objectives.

FSDH Research believes the current bearish trend in the equity market is an opportunity for strategic investors to take positions in the market. In addition to the capital gain that investors enjoy in the equity market, investors could also benefit from dividends that companies pay and the bonus issue (additional shares that investors earn, for which they do not pay).”

Another indicator of the potential success of the 2020 stock market is that many stocks are still trading below intrinsic values. What this means is that their valuations are attractive and more investors will be interested in it.

With more security exchanges coming to the fore (like FMDQ Securities Exchange and Lagos Commodities and Futures Exchange (LCFE)), there will be even more competition in the overall investment space.

According to FSDH Research, consumer goods, industrial goods, banking, and oil and gas are some of the sectors to be on the lookout for. Other sectors that will thrive this year include the financial sector and telecommunications/ICT as they are expected to be sought after.

Many stakeholders believe 2020 will see the return of the bulls to the stock market and there is no better time to get in on all the action than right now.

Written by Lawretta Egba.