What’s driving pension funds investment in Nigerian stocks?

The first half of the year has been turbulent for global markets, with external issues such as the Russia invasion of Ukraine impacting inflation and energy prices. These macro challenges have also affected Nigeria, despite high oil prices. The country has faced production challenges and struggles with policies like the subsidy on refined oil imports. As a result, revenue growth has been hampered, and inflation is on the rise. However, Nigeria's market has shown resilience, with limited foreign investment and increased domestic investor participation. This has helped the equity market to remain stable amidst global uncertainties. The fixed income side, including bond yields and Eurobonds, has seen varying trends. Despite signals of monetary policy tightening, Nigeria's actions have not followed through, leading to relatively anchored bond yields but increasing Eurobond rates. Looking ahead to the second half of the year, expectations include heightened political activities due to upcoming elections. In terms of investments, there may be increased supply in the fixed income market, potentially impacting interest rates. The equity market is expected to continue being driven by domestic investors, while currency pressures are likely to persist, leading to tight foreign exchange liquidity. Overall, the outlook for Nigeria's economy and markets is a mix of challenges and opportunities, requiring careful navigation by investors.