Investors lose N413billion amid gloomy macro-economic indices

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…As UAE supports Arab digital economy initiative***

Again, the Nigerian equity market was characterised by weak performances in November, which extended the downtrend on the back of dwindling investor confidence, and mixed economic fundamentals, causing market indices to dip further by N413 billion in one month.

Analysts linked the poor performance to a combination of weak and mixed third quarter earnings, made worse by dwindling macro-economic indices that confirmed a slowdown reflected in the composite indices of the Nigerian Stock Exchange (NSE) for the month.

Indeed, at close of transactions last month, the sectorial indicators point to stagnation in the economy, with many companies unable to grow their sales revenue in the recent corporate earnings reports, despite all the domestic and foreign borrowing and huge budgets since 2015.

These have not been helped either by the uncertainties now associated with next year’s general elections that have made the market close lower for the month under review, despite resisting decline for more than two weeks.

During the period, the benchmark All-Share index side-trended, before giving up to sell pressure, after which it broke down support level to make lower lows on lower demand for stocks.

Manufacturing activities in the current year have remained low, due to the declining purchasing power of Nigerians and dwindling productivity, evident in the free fall in share prices of firms under the subsector.

Specifically, the first three quarterly results of companies listed on the NSE generally reveal mixed performances in revenue among operators in consumer and industrial goods sectors.

Most of them came below expectations, reflecting the impact of low economic activities, and high cost of living and doing business. Another important factor is the resurgence of inflation.

Furthermore, November saw the NSE All-Share Index lose a total of 1,132 basis points or 3.4 per cent from 32,006.65 at which it opened on Thursday 1st, to 30,874.17 as at Friday 30th.

Also, the market capitalisation dropped by N413 billion or 3.5 per cent from N11.684 trillion to N11.271 trillion. The downtrend continued on lack of economic direction, and the much-needed positive information to trigger demand.

Reacting to the market performance, the Chief Executive Officer, Investdata Consulting, Ambrose Omodion, said stock market in the November closed in the red in an attempt to resist the decline recorded in the previous month.

“During the month, there were 21 trading sessions, with the market closing red on 13 of those days, and up in eight, continuing a 10-month downtrend that impacted negatively on year-to-date return that stood at a loss position of 19.17 per cent. This is attributable to brewing political concerns, weak macro-economic indices and the exit of foreign investors due to the high yield environment in developed markets.
“This has made the Nigerian stock market rank among the worst performing across Africa and indeed, the globe with many stocks on the exchange suffering huge losses, a situation that has however made many of them highly undervalued, offering high margin of safety for discerning investors.”

Also, the Managing Director, Highcap Securities Limited, David Adonri, said: “The Equities market year to November 30, declined by 19 per cent, the situation actually got worsened in November. This portrays a slow-down in the economy that is made worse by the political uncertainties ahead of the 2019 general elections, following which investors are taking a flight for safety preferring to hold on to cash until the political direction becomes clear, while those remaining are trading and investing with utmost caution.”

An independent investor, Ameachi Egbo, urged the federal government to change the current trend and allay fears of both foreign and domestic investors over the coming elections, noting that failure to achieve this may eventually plunge Nigeria into recession.

He noted that a look at corporate earnings released so far reveal that many companies’ results were too far below expectation as to propel a much-needed market rebound.

“The market has been trending downwards since the beginning of this year, and the reason is not farfetched – on the political side, there is so much anxiety, uncertainty, and fear, which ultimately is affecting the stock market.

“Foreign investors have pulled their money out of the market and this trend would continue as we go deeper into the political period. This is very discouraging and if not managed, it may plunge us into another recession.”

In the meantime, a common vision for Arab Digital Economy is the bold plan driven by the Council of Arab Economic Unity (CAEU) at the League of Arab States to boost political and social stability in the Arab World through Digital Economy.

Dr. Ali Mohammed Al Khouri, Advisor to the Council of Arab Economic Unity, said that the initiative received the support of His Highness Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE’s Armed Forces.

The plan aims at digital inclusion, knowledge-based legislative and technology infrastructure, and public and private frameworks that will boost security, welfare and prosperity for the Arab societies.

The UAE’s support for the common Arab vision will promote a joint Arab action. Al-Khouri stressed on the importance of the role of technology as a tool to achieve the objectives of sustainable development and economic growth rates through creation of investments opportunities, employment and opening of new markets.

The UAE is renowned for its knowledge-based approach and youth empowerment.

The UAE has been fostering a number of initiatives for skills development like the one million Arab coders project and the e-learning platform offering over 50 million Arab students across the world access to education among other projects that support sustainable development for the Arab societies.

The Council of Arab Economic Unity (CAEU) is the execution arm for the plan. CAEU delegation met with Mourad Wahba, Assistant Secretary-General, Assistant Administration and Regional Director for Arab States at UNDP and with senior officials from the United Nation’s Division for public institutions & Digital Government. Al-Khouri noted that the investments directed towards the Arab regions by UNDP is one Billion US Dollars.

“This initiative will be the foundation to promote the social and economic security for the Arab societies. That is why it is important to cooperate with international organizations and bring together Arab and International thinkers and practitioners for the development of the strategy. Such involvement will ensure global influence and introduction”, stated Al-Khouri.

“This is a new model for developing Arab world’s economies to tackle global challenges. The UAE is putting its expertise to use to boost sustainable development in the Arab states”, Al-Khouri concluded.

The strategy will be presented in an international conference that will be hosted in AbuDhabi on 16 & 17 December 2018. The outputs will be presented to the Arab Leaders at the Arab Summit scheduled in March 2019 in Tunisia.

The World Bank noted the importance of the strategy in paving the way for inclusive economic development opportunities in the Arab world. UN, UNDP and the World Bank support the initiative and CAEU for its work for comprehensive development and enhancement of cooperation between the Arab states.

Guardian NG with additional report from The Citizen