Strength of Naira and bank earnings dampen investor sentiments. - CNBC Africa

Strength of Naira and bank earnings dampen investor sentiments.

Western Africa

by Dara Rhodes 0

“The biggest fill up we are going to see is in the power sector. Companies are listed that have interest in the power sector to take over the privatisation but we don’t see them coming to the market until 2014. So, there’s nothing in the last quarter to really push the market,” partner at 42 Parallels, Kayode Akindele told CNBC Africa.

With the recent introduction of the X-gen trading platform, the market should see an increase in retail investors, as it allows easy accessibility to the market. However, as there have been no new issues or Initial Public Offer’s into the market, there’s nothing to certainly attract investors.

“It’s alright having a system, but you need to have a product for customers to buy,” said Akindele.

The tight monetary policy environment putting pressure on earnings, changes in regulations like commissions of transactions, concerns about bank earnings have reduced investor confidence for equities.

“In the last few weeks, the doubt about bank earnings especially with Asset Management Corporation of Nigeria taking its fees from the bank, the new cash reserve ratio, are going to dampen bank deposits,” he said.

Brief stability was recorded with the Naira after significant pressure a few weeks ago, conversely, the Naira has weakened again over the last few days.

“I think the Naira is going to be under pressure for the rest of the year. You have increasing worries about oil production, crude oil theft having an effect on revenues. The budget projections for this year have been missed,” said Akindele.

The pressure of the delayed tapering is expected to still have an impact further down the line, as when tapering comes off, there will be less interest in the Nigerian bonds which will put more pressure on the Naira.

“People expect tapering to happen in Q4, when that happens  and when you look at the United States government shut down, there are lots of issues that will bring the foreign investors out which will put more pressure on the Naira,” Akindele said.

The fixed income market remains highly attractive given the present high interest rate but could be another pressure point.