What to expect from Nigeria's capital market in 2021

Africa’s best performing stock market ended the past trading week cumulatively on a bullish note.

The All-Share Index and Market Capitalization appreciated by 5.42% to close the week at 38,800.01 and N20.279 trillion respectively.Investors at the Nigerian Stock Exchange gained N1.04 trillion in the past four trading sessions.

Nigerian’s crude, selling at $51/barrel, kept stocks rally up. Stock experts anticipate the present bullish run currently playing out at Africa’s best-performing equity market will remain long term, albeit alongside profit-taking seen lately at its last trading session.

What they are saying

Abiodun Keripe, Managing Director, Afrinvest Research, in a note to Nairametrics, spoke on his expectations of the best performing Stock market in Africa for next year as he dug deeper into the macro giving Nigerian equities an edge.

“The equities market presents attractive opportunities for investors in form of capital appreciation and dividend return given the low yield environment in the fixed income space. Nigerian stocks are currently undervalued and present an opportunity for growth in the short to medium term. The current ROI in the equities market is positive with a YTD return at 44.6% compared to the inflation rate at 14.9%.“We believe stocks in the financial services (mostly banks), ICT, and the industrial sectors present strong prospects for growth given their resilience to the economic recession.”

Abayomi Oyeti, an Insurance expert at NLPC Pension Fund Administrators Limited, in an exclusive interview with Nairametrics, spoke on prevailing macros that could take shape in Nigeria’s pension industry including the Retirement Saving account transfer

“The trending thing in the pension industry is the RSA transfer which commenced on 16th November 2020. The first week in January 2021 will be when the first transfer of the pension assets will be done and the successful and seamless transfer of these pension assets will trigger the furry of activities in the industry.“Pension Fund Administrators will lay emphasis on rendering quality service delivery and ensuring wise investment decisions to retain their RSA holders amidst competition from other PFAs, this will be the focus for PFAs in 2021.”

Keripe elaborated on the current situation at Nigeria’s debt market not forgetting that most Nigerian institutional investors are still actively involved amid an ultra low-interest-rate environment as lacklustre yield prevails in the Nigerian treasury bills market, on the consideration that the present 1-year treasury yields trade at 0.65%.

Yields are currently very low in the domestic fixed income market due to the policy actions of the CBN which restricted local investments in OMO securities, inducing huge demand for Treasury bills.

“Investments in domestic bills and bonds will earn a negative real return when compared with the inflation rate. For emphasis, the 5-year and 10-year bonds currently trade at 5.2% and 6.3% respectively and the 1-year Treasury bill trades at a 0.65% yield. The Sub-Saharan Africa Eurobonds market presents opportunities for attractive yields and serves as a currency hedge at current pricing.”Furthermore, he opined on the second wave of COVID-19 impact on Africa’s largest economy amid increasing caseloads prevailing at record levels.

“There are risks to our outlook on SSA instruments due to the susceptibility of commodity prices to global economic uncertainties. A prolonged new wave of the pandemic especially in developed countries and delay in deployment of vaccines may adversely impact commodity prices and drive sell-offs in SSA instruments.”