WorldStage Newsoline– The year 2018 remains an opportunity for investors to make money in both equities and fixed income securities, the Managing Director, Afrinvest Securities, Ayodeji Ebo has forecasted.
Speaking at the Finance Correspondents Association of Nigeria (FICAN) Economic Outlook with theme: ‘Nigeria Economy and Financial Market Outlook: 2017 Review and 2018 Outlook’ held at the FICAN Centre, Lagos, he however advised investors to be careful with their entry and exit accurately in order not to lose their funds.
According to him, there is strong correlation between oil price rise and equities performance, adding that investors always look out for profitable businesses and those with great prospects.
Speaking on the stability in the forex market, he said rate convergence has already been achieved by the CBN, adding that with low exchange rate margin, speculators have virtually abandoned the market.
“Foreign investors also consider the margin between both official and parallel market level. When there is little or no volatility in the market, that gives foreign investors’ confidence. The naira gained 35 per cent year-on-year against the dollar to close at N363 to dollar by year-end in the parallel market,” he said.
He said the Economic Recovery and Growth Plan (ERGP) of the Federal Government was built on five pillars, stabilize the microeconomic environment, achieve agriculture and food security, improve transportation infrastructure, ensure energy sufficiency in power and petroleum products and drive industrialization, focusing on small and medium enterprises.
He said the Central Bank of Nigeria (CBN) spent $15.9 billion in nine months in its weekly intervention in the foreign exchange (forex) market, Managing Director, Afrinvest Securities, Ayodeji Ebo, and that the intervention funds, were for nine months, which started April and ended December, last year.
He also said the figure was an improvement compared to the $9.6 billion spent in during same period of 2016.
He also said the Investors’ & Exporters’ Forex Window had recorded over $27.8 billion in turnover and brought about transparency and stability in the market.
He added that current account stabilised in surplus position, expanding to $9.6 billion annualised in nine months, from $2.7 billion in fiscal year 2016.
He said the foreign investors will be happy to see the interest rate remain at 14 per cent, even as the stability in the market has helped the foreign investors know that the economy is stable. “Foreign portfolio investments provide liquidity and confidence to the market. And keeping the interest rate at 14 per cent will help keep them coming,” he said.
Speaking on loans to small and medium enterprises, he said delay and outright non-payment of borrowed funds by SMEs is making it difficult for key lenders within the sector, including Bank of Industry to grant further credits to operators.
He said it was only when loans are repaid on timely basis that the lender has more capacity to lend to their borrowers.
He said that inflation rate is still higher than Monetary Policy Rate, which makes it easier for investors to go for fixed income securities like Treasury Bills, Bonds and other instruments that help investors create lasting wealth.
CBN MAY NOT CUT RATES TO KEEP FOREIGN INVESTORS
Meanwhile, in spite of expressed optimism by the governor of the Central Bank of Nigeria (CBN) that the bank will begin a gradual cut in monetary policy rates by the end of the second half of the year, Ebo saaid a rate cut will be unlikely due to the high risks associated with the economy.
The CBN governor, Godwin Emefiele had on Wednesday said the apex bank plans to begin a gradual rate cut by the end of the first half of the year as inflation continues to subside. Inflation which had risen to almost 19 per cent last year January had maintained a steady decline standing at 15.37 in Cut
Emefiele in an interview said once inflation gets to low double digits “and high single digit happens, then it should be easy for MPC to begin to look at easing. I want to think that between the end of the first and second quarter, we should begin to see easing.”
Ebo stated that a cut in rate would impact rates at the money market causing investors to consider putting their funds in other countries where the risks are not as high with a good enough returns in investment.
“This will affect the current stability at the foreign exchange market and that is what the government would not want at a time the country is approaching an election period.” He explained further that while the argument for a cut in rates is for increased lending to the real sector, a lower benchmark interest rate would not result in increased lending by banks.
“Bringing down the MPR will not translate to improved lending by the banks. There is nothing like patriotic lending because we have to grow the economy. The banks will not use private money to grow the economy when they still see there is evident risks within the space. It is about the risk environment.
Most of the companies that they would have borrowed to are struggling in terms of returns on their investment as they have factor in the cost of power as well as infrastructure and by the time you factor in those things your business is not profitable and you cannot service your loan so the bank will not lend to you.
“For instance a lot of banks lent to the power sector during the privatisation but a lot of them got their hands burnt, so no matter how low interest rate come that will not translate proportionately to increased lending as long as they continue to see that risks.
