Standard Bank sees strong 2022 earnings growth in Nigeria’s equities market

Standard Bank Group Securities has released a report that highlights the potential for valuation and earnings growth in Nigeria's equity markets for the year 2022. Despite facing risks like FX liquidity and rising interest rates, the report remains optimistic about the market's performance. Muyiwa Oni, the Regional Head of Equity Research at Standard Bank Group, recently discussed the key points of the report in an interview with CNBC Africa. Oni provided insights into the factors driving the forecasted strong earnings growth and the challenges that investors may encounter. One of the key themes of the report is the expectation of an increase in local interest rates, driven by domestic fiscal challenges rather than external factors like the US Fed Reserve's decisions. The report anticipates marginal movements in yields, particularly in the medium to longer end of the curve, as the government aims to shift its debt profile to longer-term instruments. On the earnings front, Oni pointed to the economic recovery as a key driver of anticipated growth in 2022. The improved economic conditions are expected to fuel credit growth and stabilize asset quality, leading to a decline in the cost of risk for banks. However, potential risks in non-interest revenues, such as increased competition from FinTechs and telecom companies entering the banking space, could pose challenges for profitability. Despite the bullish outlook for the economy, Oni highlighted the importance of addressing FX liquidity issues to attract foreign portfolio investors back to the Nigerian market. The current low participation levels of FPIs in the equity space reflect ongoing liquidity concerns that need to be resolved to unlock the full potential of the market. Overall, Standard Bank's report underscores the opportunities for growth in Nigeria's equities market in 2022, while also cautioning investors about the existing risks that could impact their returns.