Though investors were bullish ahead of the keenly contested presidential election, uncertainty over state of affairs of the nation post-election and recent rating of Nigeria by Fitch, may cause investors to reduce their exposure to Nigerian equities.
The Nigerian equities market gained 4.19 percent last week preceded by six consecutive days of gains, defying political uncertainties that have engendered a significant trading session of volatility in recent times.
Amid political election pressures, the equities market appreciated in value terms. Increased buy tendencies attracted over N530 billion to the stock market as equities value rose to N10.319 trillion from N9.789 trillion.
Likewise, the NSE All-Share Index appreciated by 4.19 percent to close last Friday at 30,562.93 points from 29,334.23 points at the beginning of trading.
Following the outcome of the presidential election, the bull may retreat this week as analysts already foresee investors play ‘watch-and-see’ game till May 29, 2015.
“We anticipate likely profit-taking by speculators pending a clearer coast on post-election political climate,” said investment analysts at Cowry Asset Management.
Early this week, Fitch Ratings Incorporated (Fitch) affirmed Nigeria’s BB- rating, but revised Nigeria’s credit rating outlook to “Negative.”
Fitch decision came barely a week after another rating agency, Standard & Poor’s (S&P) reduced Nigeria’s credit rating by one notch from BB- to B+.
Nigeria’s political risk has been heightened in the context of a tightly contested presidential election and potential transition issues. Fitch identified medium political risk, erosion of fiscal and external buffers for outlook revision.
The ratings agency is wary about the decline in Nigeria’s Excess Crude Account, which is Nigeria’s key fiscal buffer, and does not expect savings to be rebuilt significantly by end of 2016.
Fitch also forecasts that the current account will fall into deficit in 2015 for the first time since 1998, owing to the decline in oil prices.
According to Rotimi Peters-led team of analysts at Access Bank plc, “current trend may be reversed on the back of uncertainties that may trail the outcome of the elections.”
“We expect a slowdown in bargain hunting this week as investors wait on the final outcome of the polls, which appeared to have been more keenly contested than anticipated,” said research analysts at Lagos-based United Capital plc.
“We look to see the market trade sideways this week, albeit more to the positive side. That said, an unlikely scenario of post-election unrest will douse the current positive sentiments,” the analysts said.
Iheanyi Nwachukwu
