Investment researchers and economists at Bancorp Securities Limited, a leading investment research and consulting services firm in Nigeria, have predicted that, based on prevailing micro and macroeconomic factors in the nation’s economy, Consumer goods and Industrial goods stocks could see reduced momentum as financial services and services stocks gain prominence in the Nigerian exchange this week.
The experts, in the firm’s ‘Weekly Stock Recommendation Jul 15 – Jul 19, 2024’ circulated to our correspondent today hinged their forecast on the impact of recent monetary and fiscal policy measures and the general price level in the economy, amongst other factors.
According to them, the outlook of the economy suggests that Food inflation continues to take the foremost consideration on fiscal policy making, as it has empirically been linked to the sustenance of high and increasing inflation in the country.
Specifically, they recalled that last week, the Federal Government rolled out plans to combat the ugly development with the 150-day suspension of import duties on maize, rice, wheat, and cowpeas aims to reduce food prices and includes importing 250,000 metric tonnes each of wheat and maize.
The experts listed that PASAP initiatives as including setting a Recommended Retail Price, Guaranteed Minimum Price, restocking the food reserve, rehabilitating irrigation, and military engagement for arable land cultivation.
In addition, they noted that the government’s additional measures focused on livestock development through the Renewed Hope Committee and encouraging household food production via the Home Garden Initiative.
Despite the promises of the measures, the researchers identified some major challenges and concerns as they related to insecurity in agrarian regions like Benue and Nasarawa, with banditry and terrorism, increases farming costs and exacerbates food inflation, and environmental challenges, including desertification and shrinking water sources, which severely impacted agricultural productivity in Northern Nigeria as potential constraints to achieving the objectives of the measures
The analysts further clarified that the lack of strong agronomic and infrastructural foundations continued to hinder efforts to boost domestic supply and achieve food self-sufficiency.
To ensure sustainable food security in the country, they advocated that the government’s measures offer short-term relief but required a systematic approach for long-term food security Priorities include infrastructure development, enhanced security in farming regions, and support for local farmers.
This is even as the firm’s analysts maintained that implementing a sustainable agricultural development plan remained crucial for consistent food production and reducing dependency on imports.
Reflecting on the performance of the NGX last week, the experts stated that the firm’s sentiment indicator (TRIN) showed 0.53 points (0.40points in the previous week) after a decline in NGXASI, indicating declining bullish momentum and a potential downward trend on the bourse, save for stronger directional news.
On the local bourse’s outlook in the current week, they pointed out, however, that increasing fiscal initiatives, could compensate for a further policy rate hike by the MPC as gains in the position of foreign serves is set to enhance foreign exchange market liquidity and work in tandem with declining inflationary pressure on the domestic economy.
They further projected: “We further expect the Consumer goods and Industrial goods stocks seeing reduced momentum as financial services and services stocks gain prominence.”
