Cardinal Stone optimistic about Nigeria’s fixed income, equities markets

Cardinal Stone, a leading financial advisory firm, is optimistic about Nigeria's economic outlook for the current year. The firm expects the economy to grow by 3.7%, marking the fastest pace of growth since 2014. This positive trajectory is attributed to the healthy performances anticipated in the oil and gas, as well as manufacturing sectors. Olaolu Boboye, the Lead Economist and fixed-income strategist at Cardinal Stone, recently joined CNBC Africa to discuss the firm's projections. Boboye highlighted that 2022 is seen as a year of recovery and stability for Nigeria. Despite challenges faced over the past few years due to government policies, particularly related to foreign exchange (FX) management, the country is expected to transition to a more stable phase. He emphasized that the confidence in the Central Bank of Nigeria (CBN) leadership has led to improved market communication and clarity, which is positively perceived by both local and foreign investors. One significant aspect mentioned in the discussion was the creation of an electronic system by the CBN, aiming to enhance transparency and stability in the FX market. Boboye referenced the success of a similar system implemented in 2017, which contributed to strengthening foreign influence and supporting FX stability. The positive outcomes of these efforts are expected to lead to increased investor confidence, improved capital flows, and a more stable Naira. Regarding investment opportunities, Boboye suggested that investors could consider both fixed income and equities markets. For those inclined towards higher risk investments, the equities market is anticipated to perform well, with potential growth of up to 40%. Favorable sectors mentioned include oil and gas, companies engaging in deleveraging strategies, expansion-oriented firms, and dividend-paying entities. The increasing interest from foreign investors in the local equities market is viewed as a positive trend. On the other hand, for investors seeking stable income and having a preference for lower risk, the fixed income market remains attractive. Despite expectations of a slight moderation in yields due to potential rate cuts by the CBN, interest rates are projected to remain relatively higher compared to previous levels. Both short and long-term investments in the fixed income market are perceived as viable options for investors. In conclusion, Cardinal Stone's outlook paints a positive picture for Nigeria's economic growth and investment landscape in 2022. The projected growth rate of 3.7% signifies a significant improvement and is expected to benefit various sectors of the economy. With the anticipated stability in the FX market and favorable investment opportunities in fixed income and equities, investors are poised to explore promising avenues in Nigeria's financial markets.