Nigeria’s Stock Market Prices-in Election Postponement

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Monday, February 18, 2019    05.30PM / Teslim Shitta-Bey


Nigeria’s All Shares Index (ASI) took a -1.61% dive on day-end trading for Monday 18 February 2019. The market dip was apparently in response to the postponement of Nigeria’s 2019 Presidential elections by the country’s electoral authority, the Independent National electoral Commission (INEC). The elections initially scheduled to hold on Saturday February, 16 2019 was postponed by a week to Saturday February 23, 2019.


Chart 1 NSE All Shares Index (ASI) February 18, 2019

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Source: Bloomberg, NSE

The drop in market value represents a break in an overall bullish trend which saw the ASI flip forward from its bearish position in the month of January to a surprisingly more optimistic disposition in February, with the last two weeks, in particular, showing a steady upward price momentum. Year-on-year the market has slipped -22.14% but year-to-date (YTD) the ASI has glided slowly upwards by +1.27% (as against the Johannesburg Exchange’s (JSE’s) +3.6%, Argentina Merval’s +23.7%, and Hong Kong Hand Seng’s+8.0%). Chief trading strategist for Investment Bank, Apel Assets & Trust, Olusegun Atere, notes that, “Today’s trading pattern was a firecracker response to the elections postponement. The market was pricing-in attendant uncertainty surrounding the election process and feeding off investors fear about the integrity of the overall electoral exercise’’, he notes.

Chris Okenwa, Managing Director, FSS Securities another Lagos-based stock broking company, confirms the effect of investor apprehension on the day’s trading activities and further notes that, “investors have gone into defense mode, with a number of them staying in the short end of the fixed income market, rather than getting their heads blown off by a heavy stock market move; they have opted for the safer option of secure double digit coupons offered by gilt-edged government instruments. The financial market might be tough these days but nobody figures on dying when life is still a viable option”, he says.

FMDQ OTC Import/Export (I&E) foreign exchange window saw the Naira lose 32 basis points ( rising +0.32%) against the dollar, the N/$rate went from an opening value of N361.75/$ to a closing value of N362.07/$ . This was a steady rise indicative of the fact that traders had already built-in fears over possible election challenges in the days ahead. Nevertheless, traders still believe that tomorrow (Tuesday’s) market activities would perhaps establish the bullish sentiments or gradually discount concerns about the forthcoming polls.  The S&P FMDQ Sovereign Bond Index posted YTD of +4. 45% (as at Friday February 15, 2019) or 318 basis points higher than the NSE ASI yield for Monday February 18, 2019. Both yields, however, were well below the recent National Bureau of Statics (NBS) reported headline inflation rate of 11.37% suggesting negative real yields across markets.

 

Chart 2 Nigeria Inflation Rate December 2017- January 2019

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Source: National Bureau of Statistics (NBS)


Outlook for Tuesday February 19, 2019? As far as Okenwa is concerned, “the bears have it; the market spread today saw 37 stocks have their prices knocked down while 12 stocks went up, this is a clear indication of narrowing market breadth which stumbled to -25 today; when a witch cries in the night and a child dies in the morning who does not know that the witch caused the child’s untimely death? With election anxiety still a dominant narrative market values may take a few days to bounce back.’’, he insists.


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