Investment researchers and economists at Bancorp Securities Limited, a leading investment research and advisory firm in Nigeria, have projected that trading activities in Nigerian equities market will remain cautious in the short term, weighed down by global risk concerns and the absence of strong local catalysts.
The experts, in the firm’s ‘Stock Recommendations 24th-28th March 2025’ Note circulated to our correspondent today, however, anticipated that the release of corporate earnings expected this week or next could provide a significant boost, particularly if results exceed expectations.
According to the analysts, given last week’s broad-based sector declines, except for the consumer goods sector, there are opportunities for investors to capitalize on undervalued stocks.
They predicted that strategic positioning in these stocks could help shift market sentiment, especially if earnings reports come in strong.
The investment researchers recalled that last week, negative sentiment continued in the equities market for the fourth consecutive week, as the All-Share Index (NGX-ASI) declined by 0.94%, closing at 104,962.96 points.
They primarily attributed the depreciation in the market to sell-off across all sector indices except the consumer goods index, worsening the year-to-date performance by 1.98% as the market capitalization also declined by N532.17 billion, ebbing toN65.82 trillion at the end of the week’s trading sessions.
As expected, the trading activity also weakened, as total volume declined by 11.55% to 2.90 million units, while total market value fell 24.33% to N48.06 billion, reflecting sustained negative sentiment.
On the outlook and implications on the economy and markets of the market, the experts forecasted: “Looking ahead, there is a reasonable expectation for continued moderation in headline inflation, aided by relative stability in exchange rates and energy prices, particularly petroleum products (PLS).
“The rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS), which updated the base year from 2009 to 2024, has also played a significant role in this moderation. This adjustment, combined with the high base year effect from last year’s elevated inflation rates, is expected to support the downward trend in inflation figures.
“However, risks to this outlook remain. One major downside risk is the uncertainty surrounding the Central Bank of Nigeria’s (CBN) capacity to sustain adequate foreign exchange liquidity across all market segments. Any challenges in maintaining liquidity could lead to volatility in the naira and potentially reverse some of the progress on inflation control”, they added.
On the fiscal side, they noted that Nigeria’s debt management efforts continued to show progress as debt service payments dropped to $276 million in February, from $540 million in January, reflecting successful debt restructuring and improvements in liquidity.
However, they maintained that the overall debt burden remained high, and continued fiscal discipline and debt restructuring would be critical to prevent future fiscal strain.
The analysts further clarified: “The reduction in the revenue-to-debt service ratio from 97% to 65% in President Tinubu’s first 17 months in office indicates progress, but ongoing efforts will be necessary to keep the fiscal situation manageable.
“While food inflation has eased, falling to 23.51% in February from 26.08% in January, it remains a concern, driven by supply chain challenges and exchange rate fluctuations. Urban and rural inflation rates show improvement, but the overall high core inflation, recorded at 23.01%, indicates that price stability is still fragile. In summary, while inflation is expected to moderate further in the short term, risks in the foreign exchange market, energy sector, and debt management remain key areas of concern.
“Effective management of these risks, alongside continued fiscal discipline, will be crucial to ensuring sustained inflation control and long-term economic stability”, they added.
