Naira remains stable on black market amid dollar shortage

Nigerian stocks experienced a positive turnaround on Wednesday as the All-Share Index saw a 1.68% appreciation, breaking a three-day losing streak. Gbolahan Aina, Acting Managing Director of Cordros Asset Management, joined CNBC Africa to provide insights into the recent market movements and what investors can expect in the coming days. Aina highlighted the shift in focus from the fixed income market to the equity market due to the unattractive low yields in fixed-income securities. Investors are finding more appeal in the equity market, especially with sectors like industrial goods, consumer goods, and banking showing promise. The industrial goods sector saw a 2.8% increase, consumer goods rose by 2.9%, and the banking sector climbed 2.5%. Aina attributed the positive sentiment in these sectors to expectations of strong financial performances, particularly in the banking sector, where key players like Access Bank, Guaranty Trust Bank, and Zenith Bank are anticipated to deliver robust results despite the challenges posed by the pandemic. The cement sector is also witnessing heightened activity due to ongoing construction projects in the country. However, Aina cautioned investors to be selective in their stock choices, as some shares may not offer attractive returns. Despite the rally in the equity market, the fixed income market remains a focus for many investors. The recent bond auction saw an oversubscription of about two times, with the Debt Management Office (DMO) aiming to raise funds through the issuance of bonds maturing in 2025 and 2045. While the 2025 bond closed at 5%, slightly higher than the previous auction, the 2045 bond closed at 5.95%, lower than the previous rate of 6%. Aina noted that the trading activity in the bond market is expected to remain bullish, with a drop in prices leading to increased liquidity and trading opportunities. Despite the optimism in the bond market, challenges persist in the currency space, with the Naira facing pressure amid a shortage of dollars. Foreign portfolio investors are cautious about investing in the equity market due to currency concerns, leading to limited participation from this segment. Local investors and fund managers are more actively involved in the market, but the currency volatility poses a significant challenge. Aina emphasized that addressing the currency instability is crucial for attracting more foreign investment and restoring confidence in the Nigerian markets. Overall, while the equity market shows resilience and potential for growth, addressing currency challenges remains a critical priority for sustained market stability and investor confidence.