Nigerian stock market records 15-year high, experts advocate cautious investment
By Kingsley Odii
Nigeria’s stock market reached a 15-year high recently as the All-Share Index (ASI) of the Nigerian Stock Exchange. The market surged by 0.51% to close at 66,490.34 basis points. However, with the market showing significant gains, experts are urging investors to exercise caution.
Samuel Oyekanmi, a research analyst, advised investors to approach the market with skepticism. He warned against buying into the market when it is already at a record high, as there is a risk of a potential bubble burst. Oyekanmi emphasized the importance of entering the market before it reaches this peak.
While some experts believe that the market will continue to remain bullish, two other experts expressed concerns about the market’s disconnection from the wider economy.
Muktar Mohammed, CEO of Asher Investment, asserted that the stock exchange’s performance is bound to reflect the actual state of the nation’s economy eventually. Mohammed highlighted the dependence of the market on a stable macroeconomic space for long-term success.
Mayowa Badejo, a partner at 213 Capital Ltd, echoed Mohammed’s sentiment and cautioned against rushing into investing in stock market. Badejo pointed out that the current stock market rally does not align with the economic realities faced by Nigeria, such as high inflation reaching 24% and a widening gap between the naira and dollar exchange rates in the black market. Additionally, Nigeria’s Gross Domestic Product has experienced a slowdown to 2.51% in Q2 2023. Badejo argues that these fundamental factors do not support the sustainability of the market rally.
Badejo further said that there are a lot of foreign investors trapped in the Nigeria market due to forex scarcity.
“They may want to get out. One has to be careful and investors should not rush into. In my own view, this rally is not sustainable. The fundamentals like our GDP growth is very low, which is not enough. I you consider our inflation, exchange rate devaluation, FX reserve and other fundamentals, it does not support the rally we are seeing,” he said.
Amidst doubts, Badejo suggested a potential shift in investment towards the money market. He highlights the lower risks associated with the money market compared to the equity market, sparking a potential gravitation of investors towards this alternative.
Overall, despite the stock market’s impressive performance, experts are urging investors to approach it with caution and consider the underlying economic realities before making investment decisions.
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