Meristem Highlights Investment Opportunities in Capital Market

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By Goddy Egene

Meristem Securities, a capital market conglomerate has said strategic opportunities still exist for investors who are looking to invest in the Nigerian capital market despite the challenges brought by the COVID-19.

Some officials of Meristem stated this in line with determination to support investors who are willing to preserve their assets and manage their portfolio exposures as economic shocks ravage the investment climate.

The International Monetary Fund recently said that the global economy is in a recession which is at least of the magnitude as the 2009 economic crisis, with a predicted recovery in 2021.

Speaking on the Nigerian economic situation and investment opportunities, the Managing director of Meristem Wealth Management, Sulaiman Adedokun said since the official exit of Nigeria from a recession in the second quarter of 2017, Nigerian economy has consistently recorded slow growth (under 3.0 per cent) in real Gross Domestic Product (GDP), much below the pre-recession levels of 3-5 per cent.

“Although non-oil sectors such as telecommunications, agriculture and manufacturing have supported real GDP growth, the oil sector continues to be a key determinant of the overall growth of the economy. Thus, the crash in oil prices from an average $67.31 per barrel in December 2019 to $32.98 per barrel in March 2020 is expected to have far-reaching consequences for economic growth given the contribution of the oil sector to government revenues and foreign exchange reserves,” he said.

Adedokun said the banking sector is more resilient than previous years, noting that the consumer goods industry is going to be guided by demand for essential items during this time,

“The recapitalisation of the insurance industry is expected to continue amid the current crisis and we see growth in the telecommunications sector due to demand for voice and data services as most businesses now work remotely,” he said.

Also speaking, Head, Wealth Management at Meristem, Damilola Hassan, said: “The overall outlook for the financial market though clouded with uncertainties at this moment, we are of the opinion that fixed income securities will provide safer investment opportunities for investors given the volatility that exists in the equities space and the accompanying risk of capital loss associated with such investments but there are certain equity products that can help to diversify and broaden your portfolio exposure like the recently launched Meristem Value and Growth Exchange Traded Fund.”

According to Hassan, they expect the downward review of Nigeria’s sovereign rating outlook by global rating agencies and the elevated risk environment to lead to an upward repricing of yields in the fixed income space.

“We also recommend investments in dollar-denominated fixed income instruments as a means of hedging against foreign exchange risks,” Hassan added.