Investor confidence in Nigeria wanes due to poor market liquidity


“When you look at the room for growth for the highly capitalised stocks, there is little room for growth in terms of capital appreciation. Investors are looking for good bargains and they can find them in the mid and low cap stocks,” Financial Derivatives analyst Bie Peterside told CNBC Africa.

Attention is gradually shifting from high capitalised stocks to mid and small capitalised stocks as the market still struggles to meet liquidity demands.

Inflation numbers are due to be released next week, and Peterside added that he expects a slight shrink due to a number of recent activities in the country.  


“We might see a slight shrink given the industrial action, the ASUU strike, the health workers and possible payments the government might have to pacify these unions that are going on strike,” Peterside explained.

“That has actually helped to tone down production, so we don’t expect any spike. Our estimate is 8.64, 8.65 per cent.”

Due to the fact that liquidity has been mopped up from the banking stocks, their lending capacity to businesses has been greatly impaired.

“The profitability of the banking sector stocks and other sectors have been threatened. Those who want to sell within the Nigerian market are now going to be facing pressure from cheap imports coming in from crude, palm oil and sometimes sugar and wheat,” he said. 

We don’t expect anything fancy from Q3 results being that liquidity has been mopped up from the banking stocks.”

The weak naira will also have an impact on exchange rates as it will threaten profitability. Nigeria is however heading towards general elections in 2015, and consumer goods are expected to do well on the back of positive political expectations.