A former Commissioner for Finance in Imo State and a Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke, has given insight into what to expect in the fixed income and equities market for the remaining part of the year.
Speaking as a guest lecturer at the July 2022 monthly forum of the Finance Correspondents Association of Nigeria (FICAN), Uwaleke said that the second half (H2) of penultimate election year, is not for risk-averse investors as recent evidence from the stock market supports “a buy-in-September-sell in January strategy, (ceteris paribus) all things being equal.”
According to the pioneer President of the Association of Capital Market Academics of Nigeria (ACMAN), during electioneering, “Investors are advised to take a longer term perspective as H2 of pre-election year is a good time to identify and take positions in undervalued stocks especially in dividend aristocrats.”
The July forum, which drew all the executive members of the association to the national headquarters in Lagos from where they connected other members virtually, was themed, ‘Impact of electioneering on fixed income and equity markets in Nigeria.’
According to Uwaleke, the impact of electioneering on equity and fixed income markets is mostly felt in the second half (H2) of penultimate election year and such pre-election years in Nigeria are characterised by tension and uncertainties ahead of the general elections with adverse consequences for the economy and the equities market in particular.
The next six months, according to the financial economist, would be characterised by rising inflation rate as the impact of the Central Bank of Nigeria’s (CBN’s) tight monetary policy would be insignificant in taming inflationary pressure.
H2 2022 would also witness rising exchange rates due in part to exit of foreign investors as well as increased demand for forex by politicians as well as rising yields in the fixed income market. Indeed, the Debt Management Office (DMO) third quarter (Q3) calendar shows bonds to be sold at coupon rates of between 12.5 per cent and 13.5 per cent.
Uwaleke also feared that the cost of debt servicing on the part of the government would increase, adding that there would be bearish stock market and negative real rate of return.
Professor Uwaleke further predicted that there would be portfolio rebalancing away from equities to fixed income securities, even as this period has been associated with the exit of foreign investors.
He said, “Domestic investors’ sentiment is usually weak as they seek to reduce their market exposure when elections draw closer. The intensity of the impact is usually a function of the degree of political tension and uncertainty generated by political activities
“While the ASI depreciated in September for all penultimate election years, it appreciated in January for all election years except 2015. The outlier, January 2015, was the election year that ushered in the present administration characterised by high tension and uncertainty, compounded by the fall in international crude oil price and the rumoured break-up prediction of Nigeria in 2015 by the United States National Intelligence Council.”
According to him, the bearish run experienced in the stock market in H2 of 2014 (largely on account of the tension) had lingered into January 2015.
“To identify mis-priced stocks, the application of ‘Tobin-Q’ or ‘Kaldor’s V’ and price/earnings ratios is advised. Ultimately, the best strategy to shield the headwinds is to stay with securities that have solid fundamentals as well as ensure a well-diversified portfolio of investments particularly during electioneering periods,” he advised.
Citing his earlier article titled, ‘Crystal-Gazing the Nigerian Stock Market in 2022,’ Uwaleke said that the tight monetary policy meant to rein in inflation would result in higher fixed income yields and make equities investment less attractive, stressing that to overcome the headwinds that characterise H2 investment climate, investors in the Nigerian stock market would be well advised to follow the time-honoured cautious investment path of asset allocation, risk management and portfolio diversification.
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The PDP spokesman recalled how the opposition party had on various occasions alerted that the APC government had ceded sovereignty over a large portion of our country to terrorists, “many of whom were imported into our country by the APC.”
He further stated: “From the video, in a brazen manner, terrorists as non-state actors boldly showed their faces, boasting, admitting and confirming their participation in the Kuje Prison break, some of whom were former prison inmates who were either jailed or awaiting trial for their previous terrorism act against our country.
“Nigerians can equally recall the confession by the Governor of Kaduna State, Mallam Nasir el-Rufai that the APC government knows the plans and whereabouts of the terrorists but failed to act.
According to Ologunagba, about 18,000 Nigerians have been killed by terrorists between 2020 and 2022 “as the criminals continue to be emboldened by the failures and obvious complicity of the APC and to which the PDP had always drawn attention.”
“This is not politics; this is about humanity and leadership, which leadership sadly and unfortunately is missing in our country at this time,” he said.
The PDP added that it is appalled by “the lame response by the apparently helpless, clueless and deflated Buhari Presidency, wherein it told an agonizing nation that President Buhari “has done all and even more than what was expected of him as Commander in Chief by way of morale, material and equipment support to the military…”
“This is a direct admission of incapacity and failure by the Buhari Presidency and the APC. At such a time, in other climes, the President directly leads the charge and takes drastic measures to rescue and protect his citizens.
“In time of adversity, the President transmutes into Consoler-in-Chief to give hope and succour to the citizens. Painfully, Nigeria does not have a President who cares and can stand as Consoler-in-Chief to the citizens.
“It has now become very imperative for Nigerians to take note and realize that the only solution to this unfortunate situation is to hold the APC government accountable. We must come together as a people, irrespective of our political, ethnic and religious affiliations to resist the fascist-leaning tendencies of the APC administration.
Ologunagba called for an urgent meeting of the National Council of State to advise on the way to go over the nation’s worsening insecurity.
“Our nation must not fall. The resilient Nigerian spirit and ‘can-do- attitude’ must be rekindled by all to prevail on the President to immediately and without further delay, accede to the demand by the PDP and other well-meaning Nigerians to convene a special session of the National Council of State to find a lasting solution since the President has, in his own admission, come to his wit’s end,” the PDP spokesman declared.
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