Friday, July 20, 2018 09:13 AM / United Capital
Going into the last 6-8 months to the 2019 elections, we expect the usual electioneering cycle to play out again. Election eves in Nigeria are marked by increased political spending as politicians attempt to sway the populace to their side.
Increased spending has several implications for various sectors of the economy. While some sectors may not experience significant expansion, increased spending is positive for the services sector (especially trades, real estate and hospitality) which relapsed in Q1-18 despite the recovery in the broader economy.
The cement, construction, and infrastructural space may also benefit, capital spending tends to increase. However, the downside to this includes increased pressure on the local currency and the general price level.
The big concern for the market is the possibility of an overpriced political/country risk which may translate into a depressed financial market performance. Overall, we are of the view that political uncertainties which are clearly temporal are probably exaggerated.
The real concerns in our views are the long-term structural issues which include infrastructural deficits, system inefficiencies and the reluctance to take bold policy reforms required to restore growth to the pre-2015 levels.