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2019 ELECTIONS: Nigeria Economy in Trouble

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Nigeria is at it again. It’s four-yearly crossroads around the electoral calendar in 2019 and just like 2015, political risks around elections are co-joined with economic uncertainty.

As it was in 2015, when the Nigerian Stock Exchange (NSE) slumped below its three-year low due to what market analysts attributed to dwindling crude oil price, foreign exchange problems and exodus of foreign portfolio investors, the picture this time round is also trending towards a slide in the critical indices.

The market was also negatively affected by the instability of the naira exchange rate, which hovered around N197 and N200 to the dollar at the official market for the better part of the year, despite various measures adopted by the Central Bank of Nigeria (CBN); this discouraged foreign investors from the bourse.

Available data obtained from NSE as at December 31, 2015 showed that the equity market dipped by 17.36 per cent year-to-date compared with a decline of 16.14 per cent posted in 2014.

The All-Share Index (ASI) lost 6014.90 points or 17.36 per cent to close for the year at 28,642.25 on December 31, 2015 from the 34,657.15 it opened for the year.

Also, the market capitalisation, which opened for the year at N11.478 trillion, lost N1.63 trillion to close at N9.850 trillion on December 31, 2015 due to huge price losses by some blue chips’ stocks.

This time round, much of the economic woes are the results of wrong policy choices and as a result, the nation’s Gross Domestic Product (GDP) sits below 2 per cent as reported in 2018; 1.95 per cent in Q1,1.5 per cent in Q2 and 1.81 per cent in Q3.

The performance of economic sectors remained tepid with the construction sector growth crashing to 0.54 per cent in Q3 after growing by 7.66 per cent in Q2; manufacturing grew by 0.68 and 1.92 in Q2 and Q3 respectively; the real estate sector remained in a long term contraction just as the financial sector recorded a quarterly contraction of 4.81 per cent. Other sectors did poorly as well including education, health and public administration, with key exceptions being transport, telecommunications and utilities.

Furthermore, reforms in key sectors of the economy have remained sterile. For example, legislative attempts in reforming the upstream and downstream of the oil and gas sector were all unfruitful power supply is yet to improve significantly, while security challenges have continued.

The Nigerian stock market traded mostly on the negative side in 2018, closing the year with a negative average full-year return of -17.81 per cent at 31,430.50 points as against its year’s opening index of 38,243.19 points.

Aggregate market value of all quoted equities or market capitalisation also dropped from its 2018’s opening value of N13.609 trillion to close at N11.721 trillion, representing a decrease of 13.88 per cent or N1.889 trillion.

Foreign portfolio investments in the year under review outpaced domestic participation by 1.73 per cent, accounting for 50.87 per cent of total transactions, while domestic transactions accounted for 49.13 per cent. Within Domestic segment, Institutional order flow was 56 per cent, retail order flow was 44 per cent, while fixed income market capitalisation increased by 11.75 per cent to N10.17 trillion in 2018 from N9.10 trillion in 2017.

Equity listings on the board remained mute except for the listing of Notore Chemical Industries Plc, while the admission of Skyway Aviation Handling Company Plc (SAHCO)’s 406,074,000 ordinary shares of 50 kobo each at N4.65 turned a welcome feat for Nigeria.

Most analysts agreed that heightened political risks and macroeconomic uncertainties were major factors that adversely impacted the equities market in 2018. According to them, intense political activities started earlier than expected and the tenor of the campaigns appeared to worry investors, especially foreign investors that account for more than half of transactions at the bourse.

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