Nigerian market outlook: Analysts upbeat, entertain no fears of election risk

There appears a no fears outlook for the Nigerian market and economy despite rising geopolitical tensions and the coming general election, according to a cross section of market and economic analysts who spoke to businessamlive.com

The analysts say growth in the economy is anticipated to strengthen as commodity prices firm up and domestic demand gradually gains ground, adding that the usual downside risk of the 2019 elections would not count for much.

According to United Capital analysts, the sustained policy stimulus by the European Central Bank (ECB) and the Bank of Japan (BOJ are seen positive for global financial markets, while a stable outlook for oil prices suggests that the appetite for assets in oil-exporting economies like Nigeria is set for another bullish year.

“Our outlook on the currency market, the flow of funds and movement of external reserves is medium-term stable amid expected stability in the oil market and supportive policy environment. The risk to this outlook includes outsized exposure to Foreign Portfolio Investments (FPIs) and uncertainties associated with the build-up to the 2019 election,” the United Capital analysts noted.

The worry on the election risk to the economy is equally expressed by Bisi Oni, executive director and chief operating officer at FundQuest Financial Services Limited.

“Preparations for the coming elections will begin in earnest in 2018 and may stand in the way of the CBN in managing price movements and the exchange rate,” he said.

He noted that the CBN has been proactive since the past eleven months with a cocktail of policies that has brought to bear on the economy, which has seen the reflation of the forex market and the return of foreign investors to the capital market.

On the 2019 elections, Oni said the hawks are already gathering.

“My fears are that election spending may decide how far the CBN can go defending the naira. In a year to an election, attention always shifts from the economy. In real terms we just have only six months to put value into the economy before politicking starts,” he pointed out.

However, analysts from other investment houses who spoke to businessamlive and who want to be anonymous as they have no authority to speak on the record for their organisations, have played down the impact of the elections.

They said international investors seem to be wiser now following the panic which heralded the 2015 elections in Nigeria and the elections in Kenya and Ghana, which at the end did not turn out as expected.

“Elections come and go but the market remains,” one said, adding that most portfolio investors would make stakes on the market with the hope of reaping big when the elections are done with.

They are upbeat that the implementation of a decent list of pro-market policy actions with the fact that the chill of recession has given way to spring and leading indicators turning positive, may sustain investors’ sentiments despite the coming elections.