Nigeria's market trades in the red

Nigeria's equities market has faced a challenging week as it traded mostly in the red, dampening investors' risk appetite. Dare Fajimolu, a Research Officer at Blue Vertex, joined CNBC Africa to analyze the market performance amidst the headwinds. With just one day of marginal gains this week, the market experienced a setback as it fell back into negative territory. The Nigerian Naira hitting a new multi-year low of $516 against the dollar added to the woes. This new development has raised concerns about companies that rely on imported materials and do not qualify for the Central Bank of Nigeria's Forex window. The exposure to the fluctuating dollar poses significant risks to these companies, affecting their production and bottom line. For instance, companies like Guinness and Nigerian Breweries have already reported adverse results due to their dependence on imported inputs. Investors are likely to view these companies in a negative light, anticipating further challenges in their financial performance. The National Economic Council's call for a review of the FX policy by the CBN has brought some attention to the market. However, the specifics of what NAC expects from the CBN remain unclear. While the aim may be to narrow the gap between the interbank and parallel market rates, the practical implications are yet to be fully understood. Investors are cautiously optimistic about the intervention, considering past instances where similar promises did not result in immediate solutions. The market is seeking a signal of commitment from the authorities to address the FX challenges, even though the effects may not be immediate. Despite low volumes in trading this week, a few stocks, like Forte Oil, managed to see multiple days of gains. Looking ahead, investors are eyeing upcoming earnings reports, expecting some boost for stocks. However, the anticipation is mixed as the fourth-quarter results may not mirror a drastic improvement given the economic conditions. Companies with a history of dividend payments, such as JTB and Access Bank, could garner more interest from investors. While there is some level of excitement around potential dividends, investors remain cautious about the overall market outlook. The market awaits signals from the CBN and hopes for a better run in the coming weeks.