Leveraging Opportunities for Investment in 2018

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The growth prospects for Nigeria in the fiscal year 2018 are very bright, says the World Bank, and this position was corroborated by investment experts. Bamidele Famoofo, in this report, presents the various strategies and opportunities for investment in 2018

In line with the projection of the World Bank that the economy of Nigeria, largest economy in Africa, would experience its best growth in the next two years, with GDP climbing to 2.5 per cent this year from 1.0 per cent expected in 2017, investment and financial experts have reeled out strategies discerning investors could employ to tap into opportunities and benefits availed by the growing economy.

Hantec Global, a financial markets company, with presence in five continents of the world, says growth horizon for the country is huge, if the necessary policies are put in place to take advantage of the weak United States dollar as well as manage the huge gains from the rising oil price in the global markets.

While analysing financial markets in 2018 recently in Lagos, Chief Market Analyst with Hantec Markets Limited, Richard Perry, said Nigeria must take pragmatic steps to capitalise on the dwindling strength of the greenback to further strengthen its naira, bringing the exchange rate lower, which will in turn sustain declining headline inflation, stable exchange rate and slowing food price inflation.

Perry, a member of the Society of Technical Analysts, with about 17 years analysing and trading experience in financial markets in the city of London, said the dollar would continue to grow weak since the United States Federal Reserve Bank has lost its first mover advantage against the Euro Area, China and other developed economies.

Another factor, which Perry noted would keep the dollar low was the US twin deficits and China’s decision not to allow its Yuan goes down against the dollar any longer. The big caveat, however, he said, would be quick returns of inflation.

On the rising oil price in the international market, Perry pointed out that Nigeria would only reap the benefits, if urgent and proactive steps are taken to cut down on importation of refined crude products. “Making sure that the existing refineries in the nation are back to work and creating new ones that will complement them are the immediate steps expected to be taken by both government and the private sector, if Nigeria must capitalise on the gains in the oil sector.”

Investment Outlook for 2018

Forex Market

While Perry delved into both technical and fundamental analysis of the financial markets as it affects investment in Nigeria, Head, Business Development, Hantec Global, Adegboyega Shittu, in specific terms discussed how investors could take the advantage of the deep forex market, which he said remained the most robust financial market in the world at the moment.

“The forex market has unique characteristics and properties that make it an attractive market for investors who want to optimise their profits,” he said.

Shittu disclosed that the forex market with an average turnover of $5trillion daily is highly liquid and has the strong participation of world’s biggest banks that make it safe for investors.

Leading banks with the largest market share in the global forex market, according to him, include Citibank with 12.9 per cent and JPMorgan Chase & Co, 8.8 per cent among other 10 leading dealing banks in the industry.

Meanwhile, the four factors listed by Hantec Global which investors must look out for while investing in the forex market in 2018 were interest rate, monetary policy, import and export and political stability.

Director, Africa Business, Hantec Global, Mike Fowope, gave more insight into the presentation of Shittu as he revealed that Hantec Global has the primary mandate to create wealth for people across the globe in the forex market. He said his company provided the platform for people to trade currency and also teach them how to do it. “We sell opportunity for people to make money.”

Nevertheless, Fowope called on the Central Bank of Nigeria (CBN) to maintain its intervention in the forex markets in Nigeria for the economy to be able to continue to enjoin the gains it has recorded since the Investors’ and Exporters’ (I & E) Window was introduced in April 2017.

Benefits of I&E Window

Afrinvest Research in its review of the performance of the economy in January said as a result of the CBN’s implementation of the I&E Window, cumulative capital importation into Nigeria as of third quarter 2017 rose 91.5 per cent on year-on-year basis to a two-year high of US$6.8billion while the nation’s current account stabilised in surplus position, expanding to US$9.9billion, annualised in nine months ended September 2017 from US$2.7billion in the financial year ended 2016.

It would be recalled that the nation’s GDP, which witnessed a negative growth from second quarter in 2016, returned to growth of 0.7 per cent in second quarter of 2017 and sustaining the growth in third quarter of 2017, when it beat the International Monetary Fund projection of 0.8 per cent growth for 2017, rising to 1.4 per cent as at September 31, 2017. Nigeria’s headline inflation has moderated 318 basis points year-on-year to 15.37 per cent in December 2017 from 18.7 per cent in January 2017 while naira gained 35 per cent year-on-year against the greenback to close at N363.00/US$ by the end of year 2017.

Other areas where Nigeria has enjoyed gains from the I&E Window, according to analysts are favourable movement on the World Bank Ease of Doing Business Ranking for 2018, where Nigeria ranked among the 10 most improved countries of the world. According a statement attributed to the office of the Vice President of Nigeria, “Nigeria moved up 24 places (relative to a target of 20) to 145th in the World Bank Ease of Doing Business Ranking and ranked in the top most improved countries”.

According to Afrinvest Research, weak sentiment in the Nigerian capital market was upturned in April 2017, following the launch of the I&E FX. “ Market returned 42.3 per cent in 2017 following a 3-year losing streak. The performance was due largely to renewed interest by foreign and domestic investors because of stability in macroeconomic fundamentals.”

As a result of the favourable operating condition created by the monetary policies of CBN and some proactive fiscal pronouncements from government, the Nigerian bourse, according to Afrinvest Research, outperformed frontier and emerging markets peers as “12 months trailing Earnings Per Share (EPS) of the NSE All-Share Index rose 81.0 per cent year-on-year as of third quarter 2017, eclipsing previous earnings record set in 2014.”

Analysts at Afrinvest have revealed that Foreign Portfolio Inflow (FPI) into Nigeria through the NSE, more than doubled from N256.5billion in 2016 to N596.8 billion in November 2017. Average monthly inflow of FPI into the equities market in the review period rose 153.8 per cent to N54.3billion from N21.4billion.

It is believed that policy makers would not allow the growth opportunities enjoyed since second quarter of 2017 to slip off their hands despite the pressure that would come on the economy in the election year.

As regards monetary policy, CBN Governor, Godwin Emefiele, said the CBN would do everything at his disposal to ascertain that the gains from I&E FX Window on the economy is sustained. “The management of the CBN is determined to sustain these gains and will continue our vigilance and pro-activity to ensure macroeconomic stability through 2018”, Emefiele assured in statement on the review of the economy in lieu of the Monetary Policy Committee (MPC) meeting that could not hold in January due to inability to form a quorum to hold the meeting. Nigerian lawmakers are yet to ratify the nominations of the presidency to fill some vacant positions in the MPC.