Some financial experts have said that early passage and implementation of the 2017 budget will determine the performance of the Nigerian Stock Exchange (NSE).
According to them, the implementation of the 2017 budget, especially the capital market component has the potential to turn around stock market performance in 2017.
One of the experts, Dr. Uche Uwaleke, said the N500 billion social intervention scheme coupled with improvements noticed in market regulation had the potential of positively turning around the fortunes of the stock market in 2017.
Uwaleke, Head of Banking and Finance Department, Nasarawa State University, Keffi, explained that market performance would largely be influenced by Nigeria’s economic outlook in 2017.
“Rising inflation, interest rates, unemployment, and contracting output will not augur well for the stock market,” he said.
He said that the performance of the stock market in 2017 would in part depend on Trump’s policies in the U.S.
According to him, it will also depend on the lingering issues surrounding Brexit in view of the fact that foreign portfolio investments into Nigeria come mainly from the U.K and the U.S.
Uwaleke explained that the primary segment which remained inactive in 2016 would only rebound following the improvement in market confidence tied to economic fundamentals.
“Market direction will continue to be determined by Dangote Cement, the most capitalized stock until the expected new listings from MTN and possibly power companies materialize.
“Oil stocks like MRS, Mobil, Forte Oil will likely witness traction since international crude oil price is forecast to stay above 50 dollars per barrel.
“Companies in the agriculture sector such as Okomu Oil will equally be bullish on the average in response to favourable government policies,’’ Uwaleke said.
Also, Prof. Sheriffadeen Tella, of the Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun, said that market regulators should persuade blue chip companies and foreign companies to enlist on the stock market.
Tella explained that government needed to unbundle power generation and direct the various power companies to go and raise funds in the capital market instead of waiting on the government for subventions.
He said that companies should be encouraged to integrate backward through the promotion of mechanized agriculture which would involve the listing of or promotion of commodity market.
“This will raise the activities in the stock market and build the confidence of the public in the market gradually in 2017,’’ Tella said.
He attributed the nation’s stock exchange volatility to macroeconomic instability and lull in the economy that made it difficult for people to invest in the market.
“Profit taking was more rampant in the market in 2016, and such thing normally leads to loss of confidence in the market.
“It is natural to buy stocks when you have extra money and those who have such extra for now, prefer to buy foreign currency on the black market for keep.
They can be encouraged to buy into businesses through a private placement.”