Innovictor
New Member
Nigerian Equities (stocks listed on the Nigerian Stock Exchange) are having a tough time this year as uncertainties from the political landscape continues to pervade all sectors of the economy. The capital market is hardest hit because there's nothing that stock investors hate more than a sense of uncertainty in the market.
For instance, foreign investors are apprehensive that that pre and post-election crises could precipitate violence and anarchy in the country; hence, they are already pulling out their funds from the market. The main reason foreign investors are pulling out their funds is because it is practically hard to project what could happen after the elections and if they would be able to recover their investments.
Selling Begets Selling
The fact that foreign investors are pulling out their funds from the market is already altering the dynamics of demand and supply in the market. When the demand for stocks is high (more people are buying stocks) the supply will be "reduced" and the price of stocks will rise. Conversely, when the supply of stocks is high (more people are selling their stocks) the demand will fall and the price of stocks will fall.
In essence, the rate at which foreign investors are pulling out their funds from the market is already causing the price of stocks to fall. Interestingly, falling stock prices is in turn inducing more selling action because everybody wants to get out of stocks before they fall any further.
Where Stocks Are Heading After Elections?
I am not a politician, I do not pretend to be a political analyst, and I am not casting aspersions at the person of any politician. However, I can safely posit that the chances of an eruption of post-election crises are high if President Goodluck Jonathan emerges as the president for the second term than if General Mohammadu Buhari emerges as the winner of the election.
The memories of the post-election crises that followed the 2011 election crises in which General Buhari lost the election are still fresh in our minds. History tends to repeat itself and when it doesn't it tends to rhyme; hence, we can expect another round of post-election crises that might last a couple of weeks if General Buhari losses at the poll in March. In essence, we can expect to see continued volatility in the stock market if the PDP wins the presidency in the next election.
On the contrary, if the APC wins the presidential elections we might see smatterings of post-election violence here and there (especially in the South-South). However, such crises could be easily quenched and the violence is not likely to spread out and plunge the nation into anarchy. Hence, stocks are not likely to take a serious beating if the APC wins the presidential elections.
How can Stock Investors Play Safe?
Without much ado, the market is going into a state of volatility, which could be high or low, depending on who wins the election. However, the long-term market outlook suggests a bullish trend as soon as oil prices stops dropping and the demand for oil starts to pick up again. Hence, it might not be smart to sell all of your stock holding and run out of this market now.
If you are investing in stocks with a short term focus (6 months to 2 years), I think it will be smarter if you take out your money from stocks into other investments. If you will not need to use the investment funds in the next five to ten years, I posit that buying Nigerian stocks now is one of the best ways to build a comprehensive stock portfolio at a discount.
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