United Capital sees positive outlook for Nigerian equities in H2

United Capital, a financial services group, is optimistic about the equity market in Nigeria for the second half of the year. Wale Olusi, the Head of Research at United Capital, shared insights on the market's performance and outlook in a recent interview with CNBC Africa. Olusi highlighted that despite a 20% drop in March 2020 followed by a rebound in May and a 3% decline in June, the market is expected to see a positive trend in the coming months. He emphasized that local investors are likely to flock back to stocks due to relatively unfavorable rates in fixed income markets. Olusi noted that while some investors may opt for mutual funds, others will turn to equities for potential gains. The market is perceived to be undervalued compared to its emerging and frontier market peers, making it an attractive investment option. Olusi predicted that although profit-taking may occur, investors will capitalize on the market's valuations to enhance their portfolio returns. As the economy gradually recovers from the impact of the pandemic, the equity market is poised for growth. Moving forward, Olusi expects the Central Bank of Nigeria (CBN) to implement an expansionary monetary policy to stimulate growth and restore economic stability. With a focus on promoting growth over inflation, the CBN is anticipated to sustain efforts to support lending and asset quality in the banking sector. In terms of currency, Olusi foresees a potential adjustment of the naira by 30 to 40% in response to the fluctuations in oil prices. Despite global uncertainties and the ongoing pandemic, Olusi remains positive about the market's resilience. Regarding oil prices and inflation, he mentioned that gradual economic recovery in major economies could affect demand for oil, keeping prices relatively stable. Inflation is expected to rise gradually due to currency pressures and weakened demand. Overall, United Capital's positive outlook for Nigerian equities in the second half of the year reflects confidence in the market's potential for growth and investment opportunities.