ARM: Improved investors' confidence to drive positive equities in 2024

ARM Securities analysts believe that the Nigerian equities market is set for a positive outlook in 2024, but caution investors to be aware of potential risks such as foreign exchange shortages and inflation. Oyinkansola Aregbesola, an Investment Research Analyst at ARM Securities, shared insights on the market and offered recommendations for investors during a recent CNBC Africa interview. Aregbesola highlighted the importance of focusing on high dividend-paying stocks with robust fundamentals in sectors like Consumer Goods, Industrial Goods, Oil and Gas, and Banking. The recent shift in the CBN leadership led to a more orthodox monetary policy approach, with a focus on curbing excess liquidity in the system. This resulted in a rise in fixed income yields, and analysts expect this hawkish stance to continue in the first half of 2024. The projection includes a possible 50 to 100 basis points hike in the NPR, as the CBN aims to combat inflation. Investors are advised to consider short-term positions at the short end of the fixed income curve. Looking ahead, the government plans to tap into the Eurobond market later in the year, attracting investor interest. Aregbesola suggested that advanced markets adopting a more lenient stance could lead investors to seek higher yields in emerging markets like Nigeria. The coordination between the CBN and fiscal authorities will be crucial in guiding marginal rates and attracting foreign investments. In the equities market, policies implemented in the second half of 2023 had a positive impact, particularly in sectors like banking and oil and gas due to measures like PMS subsidy removal and FX revaluation. These sectors are expected to continue their growth trajectory in 2024, with the oil share index already crossing the 90,000 mark. Aregbesola recommended that investors focus on dividend-paying stocks in sectors like Consumer Goods, Industrial Goods, Oil and Gas, and Banking. Overall, while the outlook for the Nigerian equities market appears favorable in 2024, investors are advised to remain cautious of potential risks and focus on sectors with strong fundamentals and dividend-paying stocks.