Nigerian stocks turn lower on profit-taking

The Nigerian equities market has been experiencing a downward trend, with the market ending in the red for the third consecutive session. The market hit a 16-day low as investors engaged in profit-taking activities. Usoro Essien, an Investment Analyst at Greenwich Trust, delved into the current situation in the equities market and shed light on what to expect in the coming weeks. While discussing the recent dip in the market, Essien highlighted the possibility of a slight increase in some stocks, particularly in the banking sector, following the release of financial results. He anticipates a mixed performance, with occasional upticks amid profit-taking activities. Essien pointed out that the banking sector has been the most active, while the consumer goods sector remains uncertain due to long-term challenges. The industrial goods and volatility sectors have also witnessed declines, indicating a trend that might continue into the next week. However, despite the short-term fluctuations, Essien remains optimistic about the market's overall performance, citing potential drivers in the fourth quarter. He mentioned the Finance Minister's plan to reduce domestic debt borrowing and increase foreign debt borrowing, which could have a positive impact on equities. As a result, the cost of borrowing may decrease, making equities more attractive to investors. Regarding sectoral performance, Essien highlighted the fast-moving consumer goods (FMCG) sector as a long-term prospect for growth. He emphasized that as the economy improves, manufacturers in this sector could ramp up production and increase profitability. Additionally, he addressed the challenges facing the banking sector, particularly in asset quality, attributing it to past investments that did not yield expected returns. The conversation also touched on the oil and gas sector, which has seen fluctuations in stock prices despite the recent uptick in oil prices. Essien attributed this to the structure of the sector, with more downstream companies on the Nigerian Stock Exchange. He noted that regulated pricing for petroleum products limits the benefits of rising crude oil prices. Furthermore, Essien discussed the insurance sector, highlighting the need for improved regulations to drive growth in premiums and penetration in the market. Looking ahead, Essien expressed interest in the potential growth of the insurance sector, drawing parallels to the success of the Pension Fund Administrators (PFA) space following mandatory pension contributions. He emphasized the importance of legislation and policy in stimulating growth within the insurance industry. In conclusion, Essien emphasized the importance of understanding the intricacies of the market sectors and the impact of regulatory frameworks on their development.