…As Investors’ loss hits N2.34tr in 11 months***
Nigeria’s inflation rate is expected to rise to about 11.4 per cent for the rest of this year till mid-2019, the Central Bank of Nigeria has said.
The CBN Governor, Godwin Emefiele, disclosed this while speaking on Nigeria’s outlook and policy thrust for 2019.
He said, “Inflation expectations are rising on the backdrop of anticipated politically related liquidity injections. For the rest of 2018 and towards mid-2019, Nigeria’s rate of inflation is projected to rise slightly to about 11.4 per cent and then moderate thereafter.”
The consumer price index, which measures inflation decreased to 11.26 per cent (year-on-year) in October2018, according to latest report by the National Bureau of Statistics on its ‘CPI and inflation report October 2018’.
The statistics revealed that this was a 0.02 per cent points lower than the rate recorded in September 2018 (11.28 per cent).
While speaking on the exchange rate, he said that although the CBN had so far managed to maintain exchange rate stability, the current capital flow reversals from emerging markets were expected to continue to exert considerable pressure on market rates.
This pressure, he added, could be amplified by the forthcoming elections, especially as the political marketplace heats up.
He said notwithstanding those pressures, the CBN was determined to maintain its stable exchange rate policy stance over the next few months, given the relatively high level of reserves.
“Gross stability is projected in the foreign exchange market given increased oil-related inflows and contained import bill. I would like to make it categorically clear that sustaining a stable exchange rate is of overriding importance to us even as we continue to put measures in place to shore up reserves,” he said.
While speaking on the balance of payments, he said it was expected to remain positive in the short term, and that oil prices continue to recover, adding that it was expected that the current account balance would strengthen even further.
“This will be supported by improved non-oil performance as diversification efforts begin to yield results to reduce undue imports,” he added.
Emefiele also said that the apex bank would explore the possibility of leveraging technology to enhance credit to critical sectors of the economy, especially agriculture and manufacturing
In the meantime, investors in equities recorded a net loss of N582 billion in November, bringing total net loss over the 11-month period to N2.34 trillion.
After losing N109 billion in October, the equities market was mostly suppressed last month as investors appeared to focus on macroeconomic and political risks, notwithstanding attractive valuations of most equities.
The equities closed weekend with average decline of 4.90 per cent in November, 433 per cent worse than 0.92 per cent recorded in October. Average year-to-date return for Nigerian equities closed weekend at -19.27 per cent, implying that an average investor in Nigerian equities has lost nearly one-fifth of his portfolio so far this year.
“The market does not exist in isolation. The political atmosphere is not engendering confidence and investors are bailing out to wait for more conducive time to return,” Mr Patrick Ezeagu, Chairman, Association of Stockbroking Houses of Nigeria (ASHON) said.
Ezeagu, a senior investment banker and dealer at the Nigerian Stock Exchange (NSE), said the continued decline of the equities market was a reflective of the uncertainties and heightened fears of political risks, citing the continuous brickbats between the major political parties and candidates that tend to overheat the polity.
Aggregate market value of all quoted equities at the NSE closed weekend at N11.271 trillion as against N11.853 trillion recorded at the beginning of the month. The All Share Index (ASI)- a value-based common index that tracks share prices of all quoted companies at the NSE, trended downward to close the month at 30,874.17 points compared with 32,466.27 points posted as index-on-board at the beginning of the month.
The ASI had opened 2018 at 38,243.19 points while aggregate market value of all quoted equities had opened at N13.609 trillion.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had during the month held its last meeting for the year, voting unanimously to retain all policy rates. The MPC retained Monetary Policy Rate (MPR) at 14.0 per cent with the asymmetric corridor of +200 basis points and -500 basis points, Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio (LR) at 30.0 per cent.
Ezeagu noted that the pricing trend at the stock market belies the stable corporate performance, citing impressive third quarter earnings and interim dividends by major quoted companies, most of which failed to lift the companies.
He said the outlook for the market in the next few months will depend on the smoothness of the political transition and the immediate economic direction after the election.
Chief Operating Officer, GTI Capital, Mr. Kehinde Hassan, said the outlook for the market in the new month remains negative as there are no positive drivers to jumpstart a recovery.
Citing key economic indicators including the pressure on national revenue as crude oil price plummets, Hassan said the tensed security situation and macroeconomic uncertainties have compounded political risks.
Quoted equities had traded this year largely on the negative as Nigeria prepares for the February 2019 general elections. President Muhammadu Buhari is seeking second term on the platform of the ruling All Progressives Congress (APC). The main opposition party- Peoples Democratic Party (PDP), which had ruled for 16 years before the 2015 victory of the APC, has picked former Vice President Atiku Abubakar in an epic fight for a comeback.
Quarter-on-quarter, the market has failed to respond to somewhat steady corporate earnings and dividend recommendations. Investors lost N1.90 trillion in the third quarter, wiping off the modest gain of N257 billion recorded at the end of the first half, leaving investors with a nine-month net capital depreciation of N1.65 trillion.
From a net capital gain of about N1.7 trillion at the height of its rally in the first quarter, Nigerian equities had closed the second quarter almost flat with average gain of 0.09 per cent for the six-month period ended June 30, 2018, compared with average gain of 8.53 per cent recorded at the end of first quarter. Nigerian equities had recorded average loss of 7.77 per cent in the second quarter, equivalent to net capital depreciation of N1.13 trillion compared with capital gain of N1.384 trillion recorded by the end of first quarter.
Nigerian equities had in January 2018 hit all-time high with market capitalisation of N15.3 trillion while the ASI had risen to 43,041.54 points, its highest index points since October 2008. However, profit-taking fluctuations that started in March 2018 worsened considerably into a swinging selloff in May 2018.
The decline in 2018 appears set to halve the gain recorded in the previous year. Nigerian equities closed 2017 with full-year average return of 42.30 per cent, ranking within the top 10 best-performing equities across the world. Aggregate market value of quoted equities had closed 2017 with net capital appreciation of N4.36 trillion.
Punch with additional report from Nation