Investment researchers at Bancorp Securities Limited, one of Nigeria’s investment research and consulting services providers, have projected a sustained bullish price correction momentum in the Nigerian Exchange (NGX) this week as investors brace up for investment earnings from expected dividend declarations.
The researchers, in the firm’s ‘Weekly Stock Recommendation for Feb. 05 – Feb. 09, 2024’ publication circulated to our correspondent on Monday, noted that over the past week the foreign exchange (FX) market was wrought with policy adjustments, which served to enhance transparency in the administration of FX in the country and reduce volatility therein.
According to the experts, the monetary policies of the Central Bank of Nigeria (CBN) will have longer term impact in the domestic macroeconomy, especially as the nation is largely import dependent.
They listed some of the policies of the apex bank as including Enforcing the liquidation of long net open positions in foreign assets of banks, to inhibit racketeering, by commercial banks vis a vis, “20% short positions and 0% long positions”; Temporarily barring banks and Fintech startups from participating in international money transfer operations (IMTO’s), and raised the minimum capital requirements for such function to $1 million and its Naira equivalent for local counterparts; and Removing the exchange restrictions for International Money Transfer Operators (IMTOs), on their daily quotations previously +/- 2.5% of the previous day’s closing rate on the foreign exchange market, amongst others.
They noted that the cumulative impact of these policies was to enhance transparency in the foreign exchange market, thus inhibiting arbitrage opportunities.
However, the firm’s analysts maintained that it was incumbent on fiscal policies to ameliorate the immediate inflation (headed towards 30.00% mark), which is a necessary but step price of this policy in the short run.
They explained that this can be achieved through enhance and pivotal government spending in developmental areas, and addressing the irregularities around the administration of the NNPCL’s finances.
On the local bourse’s outlook for the week, the experts projected: “In this current week, we expect the bullish price correction on the local bourse to persist, as investors position for earnings releases and dividend declarations.”
