Godwin Emefiele, CBN Governor |
Market breadth, one indicator of
investors’ sentiments, was negative recording only eight gainers as against 19
losers at the end of trading session. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html The following day was no different as the equities
market also posted a loss with the NSE All-Share Index depreciating by 0.17 per
cent to close at 28,847.81 points. Could
this string of losses, which trailed the announcement, be a reflection of
investors’ displeasure with Emefiele’s reappointment? It would be wrong to
think so. This is because the evidence from intraday trading on that fateful
Thursday points to the fact that the equities market was already on a downward
journey even before the news was made public consistent with a negative
trajectory since that week began.
Only the previous day, a bigger loss of
0.45 per cent had been recorded. The bearish sentiment was evident across
virtually all sectors throughout the week. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html In
fact, both the NSE All-Share Index and market capitalisation have been trending
downwards since the start of this year with Year-to-Date return now down by
more than eight per cent. So, it had nothing to do with the news of the CBN
Governor’s reappointment.
To be sure, if there is one thing
Emefiele’s appointment has guaranteed, it is monetary policy consistency which
is positive for the stock market. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Under
his leadership, the CBN has maintained stability in the foreign exchange market
especially after the introduction of the investors and exporters’ window in
April 2017, effectively managed the country’s external reserves including
through the policy on 43 items as well as subdued inflationary pressure to a
large extent with core inflation rate now single digit.
The various intervention schemes by the
apex bank in the real sector, prominent among which is the Anchor Borrower
programme, have also contributed immensely to the growth of the non-oil sector.
http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Indeed, regarding the economy’s return to a
positive growth path in 2017 following five consecutive quarters of negative
growth in GDP, the CBN played a key role and has since then remained the ‘major
game in town’.
It bears repeating that if the stock
market has not responded appreciably to these economic fundamentals especially
in the last one year, it is more to do with legacy headwinds including the impact of the progressive
monetary policy normalisation in some advanced economies especially in the United
States leading to higher yields and capital outflows from frontier and emerging
markets, appreciation of the US dollar against the currencies of most advanced
and emerging market economies, global portfolio rebalancing from equities to
fixed income securities and the negative effect of the trade war between the US
and China. Other factors included the slowdown in the Chinese economy,
uncertainties which surrounded BREXIT negotiations as well as volatility in
crude oil prices.
On the domestic scene, the stock market
contended with the rebalancing of portfolios from the equities to the fixed
income market due to higher market yields, sustained profit taking activities
of foreign investors arising from election-related uncertainties, panic-selling
behaviour of domestic investors as well as the delay in the passage of the 2019
Appropriation Bill. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html Further, the bottom lines of many companies
continue to be impacted by a difficult operating environment arising from
inadequate physical infrastructure especially power.
The deposit money banks suffer a
similar fate which has made it difficult for many of them to channel credit to
the real sector. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html As admitted by Emefiele, “interest rates reflect
not just the cost of capital but also the cost of doing business from the
perspective of the lender. Given that most banks have to individually provide
security, power and other infrastructure, it is not surprising that some of
these costs are passed on to customers in the form of high interest rates”.
Against the backdrop of favourable
crude oil prices given current developments in the oil futures market which
indicate that oil prices will remain considerably above the Federal
Government’s 2019 budget benchmark of US$60 per barrel, the trend of declining
long term yields in the US and the likelihood that capital flows may be
redirected to frontier and emerging economies, Emefiele’s reappointment bodes
well for the Nigerian stock market.
This is because investors have
reasonable assurance of continued stability in the foreign exchange market,
moderation in inflation rate, increased tempo in the CBN special interventions
in growth-enhancing sectors especially agriculture and non-agricultural SMEs as
well as steady growth in GDP which the CBN projection has put at 2.74 per cent
in 2019.
Another good news is that the monetary
authority has signalled its readiness to spur economic growth through an
accommodative policy stance. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html In its Monetary Policy Communiqué of March 2019,
the CBN governor was quoted to have said that “in its consideration of the best
monetary policy option, the committee felt that given the relative stability in
the key macroeconomic variables, there is the need to signal a new direction
that is pro-growth”. This “new direction” will surely lift animal spirits in
the stock market.
As an aside, it is not for nothing that
Emefiele was elected as chairman of the West Africa Monetary Zone sometime last
year to champion the attainment of the ECOWAS single currency objective by
2020. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html His reappointment for another five-year term
provides a good opportunity to pursue this objective. If he actualises this
with the cooperation of colleagues from member countries working towards the
convergence criteria, Nigeria’s stock market could prove to be the hub of
capital markets within the ECOWAS sub-region.
All said, despite the poor performance
of the Nigerian stock market since the year began, its outlook is bright on the
strength of relative macroeconomic stability already achieved by the government
with the support of the Central Bank. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html One can safely bet that the NSE index direction
will be northwards from the beginning of the third quarter of this year
especially after a new cabinet is put in place and Emefiele’s nomination for
second term gets confirmed by the Senate. (Punch)
Are you an exporter? Do you like
to master the contemporary dynamics of non-oil export trade and avoid getting
defrauded by the foreign buyers of your exportable products? Click on the link
below:
Have you ever imagines how the
financial status of your company will grow when more than 20,000 CEOs and top
managers of multinational companies pay for your products and services? For
more information, click on the link below:
http://www.tectono-business.com/2015/07/tectono-business-review-in-conjunction_21.html
No comments:
Post a Comment