Stakeholders in the Nigerian capital market have predicted that the 2016 financial year end result would be depressed due to the harsh operating environment confronting the country.
The expected reduced earnings and losses which would characterize the 2016 financial year result, the stakeholders said would further worsen the paucity of disposable income, hence the expected dividend payment would either be meager or none existent.
David Imafidon Adonri, a dealing member of the Nigerian stock exchange said that 2016 earnings expected to be released in the first quarter of 2017 would be poor, even as very few would break even during the financial year.
Imafidon, a senior stock broker said that the market recovery measure that have been implemented in 2016 will start having effect in 2017 and the instability in the foreign exchange market will gradually be taken care of. This points to the fact that the market will recover in 2017 as the companies would be expected to have cleaner and predictable operating environment.
“Corporate earnings will be depressed, don’t forget that there is recession in 2016, and across board dividend payout will also be depressed.’
He said that because companies faced very harsh operating environment, and liquidity crunch which negatively impacted earnings, worsens operating expense and heightened provisioning. According to him, when earnings drop or when companies record loss, the possibility to pay dividend will no longer be there.
He however said that the few companies that will likely pay dividend for the 2016 financial year in 2017, their dividend yield will likely be higher than expected. “But several other companies will not be able to pay dividend’ said Adonri.
Speaking on measure that will revive the capital market in 2017, he said that countries in stagnation need to embark on policies that would revive the vibrancy of the economy by further boosting business operations and the operating environment.
“The government will have to come up with specific programmes that will be directed at various sectors of t economy. Stagflation, he said is as a result of scarcity of goods in the economy. The supply curve has shifted inwards, what the fiscal and monetary policies have done is to stifle demand.
The stock broker said that the government is yet to come up with specific programmes to beef up the productive sector.
According to him, based on the policy stand of the government and its implication on the economy and companies, many business concerns have left the country “defectors are in their thousands and the government has to be up and doing in coming up with policies that will address short supply in various sectors of the economy.
He said that the government’s 10 point agenda released recently aimed at addressing the identified problems, but however regretted that the points were nor far reaching enough to tackle the persistent economic challenge facing the country.
“What they have done will definitely have salutary effect on the economy, but the recovery will not be expeditious, it will be very sluggish, extremely very sluggish.
He recalled that the Nigerian capital market is a reflection of the economy, moving in the same direction like the economy, so any economy recovery initiative for the economy also serves as recovery program for the capital market.
He reiterated that sluggish market recovery expected in 2017 would also have negative impact in the overall market performance.