Nigerian stock market outlook for 2017

Nigeria's equities market kicked off the year on a shaky note, with a 2.3% decline in the first trading week. Analysts are noting that investors are likely to approach the market cautiously in the coming weeks. Robert Omotunde, Head of Research at Afrinvest, shared his insights on the market's performance in 2016 and the outlook for 2017. Reflecting on the past year, Omotunde highlighted that the market saw a rush of portfolio managers closing their positions towards the end of the year, resulting in a technical play that led to a 6.2% negative close. This trend was driven by a host of policy issues that continue to weigh on the market. Omotunde stressed that the market's trajectory in 2017 will be influenced by how these policy matters unfold. One of the critical factors he pointed out was the need for flexibility in the foreign exchange policy, citing it as a significant factor affecting market performance. Considering the NSE's track record of never finishing lower four years in a row, Omotunde underscored the importance of policy changes to drive a positive shift in market sentiment. He emphasized that addressing macroeconomic challenges and enhancing policy measures would be instrumental in steering the market towards growth. Omotunde also discussed sector-specific trends, noting the industrial sector's struggles in 2016 and the need for targeted policy interventions to support job creation and industrial development. He raised concerns about the government's ability to finance its ambitious budget for 2017, highlighting potential constraints in revenue generation and debt market access. These factors, coupled with moderate growth projections, could pose challenges for the industrial goods sector. Turning to the insurance industry, Omotunde acknowledged the sector's unique challenges, such as low insurance penetration levels and limited awareness among Nigerians regarding the importance of insurance coverage. While efforts are being made to educate the public about insurance benefits, addressing structural issues within the sector remains crucial for its sustainable growth. In summary, navigating Nigeria's equities market in 2017 will require a delicate balance of addressing policy bottlenecks, promoting sector-specific reforms, and enhancing market awareness. Omotunde's insights shed light on the complexities facing investors and stakeholders as they navigate the evolving landscape of Nigeria's equities market.