There was palpable excitement at the Nigerian capital market yesterday after President Bola Tinubu’s inaugural address broadly outlined direction of the new administration.
Capital market stakeholders described the inaugural address and the key policy outlines as “investors- friendly”, expressing optimism that the capital market may witness a major fillip in the period ahead with renewed interest by foreign and domestic investors.
Tinubu had, beyond addressing general issues of security, economy, infrastructure and monetary outlook, directly addressed investors’ concerns on multiple taxations, returns repatriation and foreign exchange (forex) among others.
“I have a message for our investors, local and foreign, our government shall review all their complaints about multiple taxation and various anti-investment inhibitions. We shall ensure that investors and foreign businesses repatriate their hard earned dividends and profits home,” Tinubu said, immediately after being sworn in at the Eagle Square, Abuja, on Monday.
Managing Director, Arthur Stevens Asset Management, Mr. Olatunde Amolegbe said the pronouncements by the president were “extremely important” to the capital market, noting that “they will impact the economy and the investment market in the short to medium term if implemented as mentioned”.
“The President has hit the ground running. If you are holding fixed income securities at present rates, you better consider holding on to them. We expect influx of foreign portfolio investors into the stock market now that the coast seems clear. So, a bull run might not be far behind. This will be interesting times,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS) said.
Ahead of Monday’s inauguration, anticipatory deals had seen Nigerian equities closing among world’s best returns last week, with net capital gains of N428 billion.
Against the generally negative performance of most advanced and emerging markets, Nigerian equities closed last weekend with average return of 1.51 per cent, driven by widespread positive sentiments across the sectors.
With nearly three gainers to every decliner, the benchmark index, the All Share Index (ASI) rose from its opening index of 52,187.93 points to close at 52,973.88 points. Aggregate market value of all quoted equities rose simultaneously from its opening value of N28.417 trillion to close at N28.845 trillion.
Market analysts said the inaugural address directly spoke to market expectations. Most of the points earlier raised by the CIS, the largest professional group in the capital market, were captured in the President’s maiden speech.
President, Chartered Institute of Stockbrokers (CIS), Mr Oluwole Adeosun, had described Tinubu as a pro-market activist whose leadership will lead to positive transition of policies.
He had attributed the rally at the stock market after the presidential election partly to investors’ confidence and expectations due to imminent change in leadership.
Tinubu, a former Treasurer of the global oil multinational, Mobil Oil and a globally renowned accountant, is reputed for public finance reengineering, whose ingenuity and reforms reshaped Nigeria’s former capital, Lagos, as Africa’s fifth largest economy and one of the continent’s investment hub.
Under his political leadership, Lagos has remained as the largest sub-national issuer at the capital market, with high-grade ratings by domestic and global rating agencies.
Global investment news media, Bloomberg, had also reported investors’ enthusiasm on Nigerian bonds.
According to Bloomberg, five of 10 top-performing emerging-market bonds, as the presidential election pattern became clearer, were Nigerian while sovereign-risk premium had narrowed by 104 basis points in three days.
“Nigerian bonds are posting some of the best gains in emerging markets as investors bet that ruling-party candidate Bola Tinubu, who’s taken an early lead in the nation’s presidential election tally, will offer reforms to pull Africa’s largest economy out of a fiscal mess,” Bloomberg reported.
Adeosun said the market performance “signals great expectation and trust”, urging the incoming administration to strengthen the Nigerian capital market and reposition it for accelerated growth and development of the economy.
According to him, the incoming administration should pay close attention to the capital market in order to maximize its array of opportunities while both the capital and money market should receive balanced attention from the government.
Adeosun underscored the need for a unified exchange rate for the naira to encourage participation of foreign investors in the market. Foreign exchange (forex) reform is one of the economic plans of the Tinubu blueprint.
“The fundamentals of the market are getting stronger day by day as a result of so many reasons. The elections actually excite the market, because of the imminent positive changes we expect” Adeosun said, noting that the market “expect the new president and his government to hit the grounds running before the inauguration by immediately opening engagement with the capital market community”.
He expressed the readiness of the capital market professionals in working with the team of the President-elect in crafting an effective plan of action for the administration.
“We expect a stable and unified exchange rate which will increase the level of foreign investors’ participation in our market. We also expect policy and positive pronouncements that will boost the confidence of stakeholders
“First, is to properly situate the capital market in the scheme of things in the Nigerian economy. The capital and money markets must receive balanced attention for the economy to grow maximally, even optimally as the capital market provides the barometer that measures the state of the economy. Second is to address the issue of trading liquidity. Get the banks and Central Bank of Nigeria (CBN) to give more support to capital market operators.
“We have to revisit margin lending and trading in the financial markets .Furthermore, persuade the pension funds to invest a lot more on equities, to create that stability that will motivate other high networth investors to invest. Also to make the exchange rate stable to spur foreign investments. The government should lend more support to investor literacy, and specifically support CIS with annual grants to enable it perform and widen its work in this area,” Adeosun said.