TUE, JANUARY 01 2019-theG&BJournal-It was a mixed year for investors in 2018 who ran into significant headwinds but we expect the fog to lift, and fast too this year (2019). The signs are, underpinned by the raft of innovative products introduced all through 2018 by the Nigerian Stock Exchange (NSE). The resilience of the market and improved operational delivery, will underpin this year’s strong performance.
Investors will be emboldened also by the NSE’s corporate strategy which it is riding on to reposition as a more investor friendly and customer centric exchange hub in Africa which so far has excited its multi-faceted stakeholders especially issuers and investors who have stayed steadfast in 2018 accessing the market to raise and save capital respectively.
The MARKET sentiment will continue to be influenced heavily by banking stocks which may see its strongest run yet in 2019, with Diaspora Nigerians seeking to re-invest and foreigners as well showing approval on the hugely de-leveraged banks. In H1 2018 impairment losses (bad debts) fell 26 percent to N263 billion from N356 billion in H1’2017, a whopping N93 billion bad debt drained off from the sector in six months, leaving the bank balance sheets and quality of assets among the best in the world.
The Banks also have established their presence with strong governance structures and open forensic audit to move ahead of its peers in most other emerging and frontier markets. All of these are driven by unparalleled regulatory feat.
Banking stocks still hold commanding place at the Exchange which grew by 41.59% in 2017. The banks still control over 68 % of total market assets. Price-to- book-ratio has grown by about 3.96x. The sector’s PE ratio and dividend yield remains attractive.
Nigeria’s macroeconomic fundamentals remain stable and supportive of market recovery over medium to long term. The equity market holds a decent entry opportunity for investors with a medium to longer term horizon. The Lagos Chamber and Industry supports this view.
The nation’s Gross Domestic Product (GDP) grew by 1.81% (year-on-year) in real terms in the third quarter of 2018. Compared to the third quarter of 2017 which recorded a growth of 1.17%, there is an increase of 0.64% points.
The second quarter of 2018 had a growth rate of 1.50% showing a rise of 0.31% points. Quarter on quarter, real GDP growth was 9.05%.
Aggregate GDP stood at N33,368,049.14 million in nominal terms. This performance is higher when compared to the third quarter of 2017 which recorded a GDP aggregate of N29,377,674.03 million thus, presenting a positive year on year nominal growth rate of 13.58%.
This growth rate is higher relative to growth recorded in the third quarter of 2017 by 2.88% points and higher than the proceeding quarter by 0.01% points with growth rates of 10.70% and 13.57% respectively.
The growth is supported by stable oil production, a hawkish Central Bank that has ensured financial system stability and a dividend policy targeted at banks with high non-performing loans and dynamic youth demography.
Again, the recently initiated Economic Recovery and Growth Plan has begun to tackle some of the economy’s challenges, including corruption and an infrastructure deficit. The plan has also sought to remove bottlenecks to improve the ease of doing business, which in turn boosts investors’ confidence.
All of these has helped the bullish economic and capital market sentiments emanating from the country since it quickly dealt with its recession baggage in 2018.
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