Can Nigeria's recovery plan restore investors' confidence?

Nigeria's economic recovery and growth plan has raised hopes for the country's struggling economy, but the release of the long-awaited document has not yet fully restored investors' confidence in the equity markets. Ebi Funudoh, CEO of TFSC Securities, joined CNBC Africa to discuss the current state of the market and the outlook for stocks going forward. Funudoh acknowledged that while the economic plan has provided a roadmap for the future, the market is still adjusting to the new policies. He highlighted that there has been a period of consolidation and fluctuation in the market, indicating that investors are taking their time to digest the implications of the government's announced measures. The delay in investor reaction can also be attributed to the ongoing challenges in the forex market, which continue to impact stock performance. Foreign investors have been hesitant to enter the market due to uncertainties surrounding currency exchange rates and the availability of dollars. Despite efforts by the central bank to inject more dollars into the market and commit to selling currency forward, the desired impact on the stock market has not been immediate. Funudoh emphasized that it will take time for businesses to adjust to the improved forex liquidity and translate this into lower costs and increased profits. Additionally, he noted that the fixed income market is currently offering attractive returns, leading to portfolio restructuring and a shift of assets away from equities. The competition from fixed income investments is further hindering the growth of the stock market. Funudoh also addressed the need for a more market-based foreign exchange policy to attract foreign investors back to Nigeria. He expressed optimism that a transparent and market-driven approach to the Naira's valuation would encourage a flood of foreign investment into the country. However, until the central bank adopts a more flexible exchange rate regime, investors are likely to remain cautious. The lack of clarity and predictability in the forex market poses a significant challenge for both domestic and foreign investors, limiting their willingness to allocate funds to Nigerian equities. Despite the hurdles that the economy currently faces, Funudoh remains hopeful that a shift towards market-driven policies and increased transparency will eventually lead to a resurgence in investor confidence and a revitalization of the Nigerian equities market.