Nigerian equities shrug off profit taking

The Nigerian equities market has shown resilience and regained positive momentum following a recent negative trend attributed to the downgrade by FTSE Russell Group from Frontier to Unclassified Market Status. Egie Akpata, Chairman of Skymark Partners, shared insights on the impact of the downgrade and the market outlook in an interview with CNBC Africa. Akpata expressed skepticism regarding the hasty nature of the FTSE downgrade, pointing out that the disparity between official and parallel markets and unclear clarity for foreign portfolio investors remain as challenges. He questioned the significant market move triggered by the announcement, suggesting that the impact may have been overstated. Despite the initial sell-off, the market has rebounded and stabilized to some extent, with most stocks returning to their pre-announcement levels. Akpata also discussed the potential implications for foreign portfolio investment and the overall market outlook. While acknowledging the uncertainty caused by the downgrade, Akpata remained cautiously optimistic about the market's resilience, citing low valuations and dividend yields as potential drivers for future growth. He highlighted ongoing challenges in the fixed income market, noting poor demand and higher yields at bond auctions due to liquidity issues and reduced government borrowing needs. Akpata analyzed the corporate bond market, pointing out elevated debt levels and liquidity constraints impacting long-term borrowing prospects. He emphasized the importance of managing inflation and exchange rate dynamics, anticipating continued upward pressure on inflation until early next year. Akpata downplayed the potential impact of interest rate adjustments on inflation, emphasizing the need for effective liquidity management and administrative measures. Regarding the Naira's trading range, Akpata highlighted the stability in the INE window but cautioned about persistent challenges in the parallel market, with rates remaining elevated due to limited supply. He underscored the need for clarity on future market dynamics to address the parallel market's volatility. In conclusion, Akpata's insights shed light on the nuanced dynamics shaping Nigeria's financial markets, emphasizing the importance of strategic policy interventions and market-driven reforms to navigate existing challenges and spur sustainable growth.