Nigeria’s cautious monetary policy may invigorate the stock market as analysts suggest a shift from fixed-income investments to equities. With yields declining and inflation easing, major banks’ performances are anticipated to draw investors’ attention. Positive sentiment is already reflected in the stock index surge, indicating a potential growth trajectory for Nigerian stocks this year.
Nigeria’s recent cautious monetary policy is anticipated to foster bond market growth, which has seen notable advancements in fixed-income asset yields. Analysts predict an influx of investments into the stock market as yields worsen, particularly from March. With inflation showing signs of easing, investment focus is shifting towards equities, especially given the central bank’s unchanged reference rate of 27.5%, suggesting potential future cuts.
As fixed-income yields decline, the shift from bonds to stocks becomes evident. Matilda Adefalujo from Meristem Securities highlights this change in investment direction, backed by a recent auction of treasury bills that garnered low rates. Strong stock market performance has already been noted, with Nigeria’s primary index increasing by 5.4%, primarily backed by banking stocks. High demand for major companies’ financial results is expected to attract further investment.
Portfolio manager Great-David Oluwasipe notes a significant shift in market conditions due to outflows from fixed-income assets, especially targeting companies nearing their fiscal results, including major lenders. The expectation of substantial performance from banks can amplify the current market upswing. Upcoming reports from institutions like United Bank for Africa and Zenith Bank are pivotal for investor sentiment about the banking sector.
Bank stocks maintain strong fundamentals but remain undervalued relative to their intrinsic worth. With PE ratios under 2, top banks present attractive investment options despite having lagged other sectors last year. The general sentiment among analysts is that the equities market holds hidden value, particularly as portfolio managers consider enhancing their equity positions.
Despite foreign interest waning since the pandemic, analysts expect an upward trend in equity investments as fixed-income yields continue to sink, positioning Nigerian stocks as attractive alternatives. Oladayo Akinfolarin from Afrinvest predicts greater interest in insurance stocks prompted by regulatory changes raising capital requirements. In summary, Nigeria’s shift in monetary policy is likely to stimulate the stock market as investors transition from fixed-income assets seeking better returns.
Analysts foresee a strengthening stock market in Nigeria as a result of recent cautious monetary policies and declining fixed-income yields. The anticipated positive performance of major banks and upcoming financial disclosures could further enhance investor interest in equities. Overall, the investment landscape is shifting towards stocks, signaling a revitalization in Nigeria’s equity market amidst rising optimism.
Original Source: www.premiumtimesng.com
