An investment banking firm, Comercio Partners, has urged investors to adopt a cautious approach and focus on sectors that drive the economy in the second half of the year.
This was revealed in the firm’s review of the economy for the first half of the year and the outlook for the second half.
Reviewing the first half of the year, the co-Managing Partner of the firm, Steve Osho, said, “The first half of this year has been an exhilarating ride, featuring a blend of bullish and bearish sentiments in the fixed income markets.
“The Nigerian stock market, displaying its resilience, weathered macroeconomic challenges and election anxieties, soaring to its highest index point in 16 years at 66,381.20, making the NGX the best performing in Sub-Saharan Africa
“In the same vein, the beginning of the exchange rate reform which saw the acting Central Bank of Nigeria governor announcing the commencement of a much more flexible exchange rate policy and unification of the currency has seen better harmonisation between the I&E official window and the parallel market trading within a very close gap of about $/760-770.”
Projecting on the direction of the economy in the second half, Osho said the economic trajectory would be hinged on the ministerial appointments by President Bola Tinubu, as well as the forthcoming monetary and fiscal policies.
“The sustainability of the fuel subsidy removal and the liberalisation of the foreign exchange market will play pivotal roles in the second half of the year. Alongside this, the revision of the minimum wage from N30,000 to N200,000 to enable Nigerians to bear the brunt of the economic reforms emerges as a topic of interest,” he said.
For the financial markets, Osho stated that the positive performance would continue with increased participation from foreign portfolio investors.
He said, “For the fixed-income markets, we expect bullish sentiments in the near term, due to the buoyant system liquidity. However, as the year progresses, cautionary sentiments may arise, as investors keenly observe foreign portfolio investors’ participation, with yields expected to trend upwards to attract foreign portfolio investments.
“For the local stock market, we envision a continued upward trajectory in the benchmark All-Share Index, driven by investor anticipation of impressive financial performance from banks following the unification of foreign exchange rates.”
In his advice to investors, Osho said, “It is imperative for investors to adopt a cautious sentiment and to take positions in only fundamentally strong stocks due to the weak macro-economic environment.
“Market participants should prioritise the development of sound investment strategies, conduct thorough research, and diversify their portfolios. By remaining educated about market trends and seeking professional guidance, investors can adeptly navigate potential risks and seize promising opportunities.
“As we await more fiscal, monetary and structural reforms from the new administration, investors should focus on structure portfolios around secular drivers of the economy, technology, renewable energy, power sector, gas, goods and services sectors are few of those important drivers to look out for.”