United Capital Unveils Economic Report, Projects Market Recovery

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Goddy Egene

After a negative performance in 2018 and a bearish start in 2019, analysts at United Capital Plc have projected a positive close for the Nigerian equities market at the end of the year.

The projection is contained in the investment banking firm’s Economic outlook for the 2019, themed: ‘Sailing Through the Storm’

It takes a critical look at the developments in the global economy as well as the dominant themes that would shape events in the domestic economy, and a host of other economic discourse. Specifically, the report illustrates how rising downside risks and waning upside surprises will define the outlook for global economy in 2019. Also, critical concerns on the mind of investors such as; whether Sub-Sahara African (SSA) assets will rally in 2019; if the election-risk in Nigeria is overpriced; and the investment case for Nigeria in 2019, are addressed.

Commenting on the report, Group Chief Executive Officer, United Capital Plc, Peter Ashade, said: “The uncertainties around the election and transition period, and the need to implement bold policy changes are the biggest issues identified for investors in 2019. Asides the need to address the badly needed policies changes as well as take bold decision and implement them, our 2019 Economic Outlook provide insights into how local and foreign investors could wade through these uncertainties and make decisions that would take them to the next level.”

According to the report, for equities, performance in 2019 will be anchored on the outcome of the general election on one hand and the change of guard at the Central Bank of Nigeria (CBN) on the other.

“Overall, we imagine a flattish performance in first half(H1 of 2019 and a quick rebound in second half, especially if the outcome of the election is seen to result into a smooth and peaceful transmission from May 29 onward. Against the backdrop of a better balance of risks going into 2019 and considering the extreme valuation differences between Nigeria (9.0x) and the rest of the world (emerging markets: 11.6x, frontier markets: 10.9x, and the world: 15.6x), we anticipate net-capital inflow into Nigeria in 2019, especially after elections. Accordingly, our base case return for the market is projected at +9.4 per cent,” the report said.

The reported noted that three key factors would shape the performance of the Nigerian economy in 2019.

“First, the 2019 general election, billed for February, will probably subdue economic activities in Q1-19, and possibly into Q2-19, if the outcome is stretched. By the same token, the outcome of the election will shape policy and overall momentum of growth in H2-19.

Secondly, a possible change of guard at the office of the CBN Governor is another factor to watch, as the Governor’s first 5-Year tenor ends in Jun-19. Finally, the outcome of the election is anticipated to come with possible reforms across key sectors of the economy, amid gaping infrastructural deficits, disturbing poverty statistics, sharp rising population growth, rising fiscal deficit, calls for minimum wage adjustment, sub-national government insolvency, and faltering revenue base,” it said.