Commercio Partners projects positive outlook for Nigerian capital market in Q1 2021

Commercial Partners, a financial advisory firm, has projected a positive outlook for the Nigerian capital market in the first quarter of 2021. In a recent interview with CNBC Africa, Steve Oshay, the Co-Managing Partner at Commercial Partners, shared insights on the expected trends in the fixed income market, equities, and the Naira exchange rate. Oshay highlighted that the firm anticipates the spike in yields witnessed in December 2020 to continue into the first quarter of 2021 due to significant demand depression. He also mentioned that technical analysis indicates room for further appreciation of the All-Share Index of the Nigerian Stock Market. Oshay delved into the liquidity situation for the current year, emphasizing the differences from 2020. He noted that 2020 saw a substantial amount of liquidity injected into the system through OMO maturities and COVID-19 stimulus packages, leading to lower yields across various tenors. In contrast, 2021 has witnessed adjustments in yields with a slightly upward trajectory, prompting a potential shift of investor interest back to equities. Oshay pointed out that the Naira remains stable but overvalued, with a significant gap between the parallel and official rates. He discussed the impact of rising oil prices on external reserves and the challenges faced by the Central Bank of Nigeria (CBN) in maintaining exchange rate stability while addressing pressures from offshore fund outflows. Oshay suggested that the CBN would likely strive to sustain the Naira at current levels in the short term, but convergence between parallel and official rates could occur in the long run. Overall, Commercial Partners anticipates a balancing act for the CBN in managing exchange rate stability, external reserves, and interest rates throughout 2021, with potential adjustments expected by the end of the first quarter.