Bears tighten grip on equities: Nigerian markets review

Bears continued to tighten their grip on the Nigerian equities market as the midweek trading session unfolded. Despite the launch of the Growth Board for High-growth companies by the Nigerian bourse, market analyst David Adu, Senior Analyst at Meristem Securities, shed light on the challenges faced by the market and the overriding sentiment prevailing among investors. Adu expressed hope for the new Growth Board, emphasizing the importance of the equities market being a true reflection of the economy. He noted that previous attempts, such as the ASM, fell short in showcasing the economic strength due to the lackluster performance of listed companies. However, Adu remained cautiously optimistic about the potential improvements in criteria and listing standards for companies on the new board. The market, which started the year as one of the best-performing stock markets globally, has hit a roadblock in recent weeks. Unaudited four-year results and awaited publications from key sectors like banking and consumer goods have contributed to a slowdown in trading volumes and market momentum. The Central Bank of Nigeria's decision last week further dampened market expectations, with several banking stocks recording negative closures. One significant development towards the end of last year was the decline in yields in the fixed-income market, leading to a shift towards equity investments. Adu highlighted the liquidity surplus in the system, signaling potential opportunities for Pension Fund Administrators to explore high-growth stocks with attractive dividend yields. However, concerns about liquidity challenges for banks and the looming pressure on their earnings were also raised. The banking sector is expected to face increased pressure on earnings due to the Central Bank's interest rate policy, which will impact interest margins. Lower non-interest income, coupled with revised charges from the CBN, will further strain banks' profitability. Adu stressed the importance of volume growth, efficient cost management, and prudent risk practices for banks to navigate the challenging business environment. In conclusion, while the launch of the Growth Board offers a glimmer of hope for the market, bearish sentiment lingers as investors await key sector earnings and navigate the evolving regulatory landscape. The path forward for Nigerian equities will require adaptability, strategic decision-making, and a focus on sustainable growth amidst market uncertainties.