Q1 2021 GDP Growth will Woo New Issuers into the Nigerian Capital Market

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Tuesday, June 01, 2021 / 10:27 AM / Ottoabasi Abasiekong for WebTV / Header Image Credit: The Guardian Nigeria


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Nigeria's Gross Domestic Product (GDP) growth for Q1 2021 showed a snatched rise of 0.51% which was slow compared to the 1.87% in Q1 2020 but could still be considered promising enough to encourage new issuers to the capital market. Professor Uche Uwaleke the President of the Association of Capital Market Academics of Nigeria (ACMAN) said this while discussing the implications of Nigeria's Q1,2021 growth report and its implications for the local capital market.

 

According to him the positive growth rate through a gradual recovery portends hope for the capital market in the year 2021, which is a good development and cheering news for investors.

 

Speaking further he noted that it will have positive effects on investor investments in the market, although since February 2021 the equities market has witnessed a bearish run.

 

He decried the fact that the capital market in Nigeria is still not reflecting the key economic sectors, which is one of the reasons the capitalization of the market has not hit the level expected of it.

 

The academic cited the agricultural sector which contributes 22% to the nation's GDP with low representation in the market with quoted companies like Okomu Oil Palm,  Presco Plc, and  Ellah Lakes Plc being price laggards.

 

He believed the market should be able to attract Agro-industry related multinationals to increase the size of the market.

 

On the recent monetary policy committee decision of the Central Bank of Nigeria (CBN) to retain the interest rate at 11.5%, he acknowledged that the positive market performance in 2020 could be attributed to the MPC.

 

He said, "The MPC last year reduced the monetary policy rate twice and encouraged banks to support the real sector through the loan-to-deposit ratio which affected the equities market positively".

 

Uwaleke also lauded the CBN on the exchange rate unification which will incentivize more foreign direct investments and foreign portfolio, investors.

 

The Professor of Capital Markets made a strong case for the Federal Government to lead the efforts in driving primary market activities in the country.

 

He was of the view that when the government leverages the capital market to liberalize state-owned entities like the Nigeria National Petroleum Corporation (NNPC)  it will crowd in the private sector and woo more blue-chip companies to list on the market.

 

Addressing the outlook for the second half of the year, he said insecurity, exchange rate, and inflation would be key areas that would require clear policy decisions that would shape capital market performance.


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