US not tapering could have minimal impact on Nigerian market


Investors are however bracing themselves for Nigeria’s MPC meeting next week, which is expected to provide more clues for the earnings outlook of banks in the country.

“The main thing driving the local exchange markets are local issues,”Kayode Akindele, partner at 46 Parallels told CNBC Africa.

“A lot of the outflow affecting the naira mainly on dividends are people trying to get their dividends and changing it to dollars to get it out of the country. Generally, I don’t see a significant impact on tapering in the Nigerian equity market.”


He added that a number of foreign investors in the equity markets were more medium to long term, which would mean that tapering might rather affect the foreign investors in the Nigerian bond market.

The liquidity squeeze on bank earnings is nevertheless expected to have a significant effect on the market.

“For most investors, the smarter thing to do will be to look at the banks that have better liquidity and net places rather than takers of funds, and then target those banks because they are probably going to hold up better than other banks,” Akindele explained.

Despite the Central Bank of Nigeria’s (CBN) tighter liquidity policy and 50 per cent of their public sector funds being tied, the banks are still expected to balance out their account sheets.

“If this policy by CBN continues, then we are going to see the banks proper strategies for investing in the economy and doing proper banking coming to the forefront,” he said.

Should the high interest rate environment continue, a number of companies may be forced to pair back their investment profile.

New investments that were also planned to be obtained might not be affordable anymore, and many could start looking for foreign investments if cheaper.

“If you look at the reforms in the power sector, agriculture sector, the Nigerian market is on its way up. The big question marker is the elections in 2015,” said Akindele.

 By Dara Rhodes