As political parties hold primary elections around the country in preparation for the 2023 elections, capital market investors have encouraged politicians to avoid making unguarded remarks that could harm the stock market.
Investors are already concerned about the Central Bank of Nigeria’s (CBN) rate hike of 150 basis points, as well as fears of an impending global economic recession as a result of the Russia-Ukraine conflict, which has disrupted commodity supply chains since the second half of February and is currently fueling global inflationary pressure.
According to stakeholders, the country’s general elections have established a pattern of interrupting economic activity, with uncommon concerns driving sectors into speculative mode about new government policies or policy changes.
These legislative changes or inactions may have a negative or positive impact on the operations of these companies, affecting their stock market prices and making investors apprehensive of the market.
While other developing market exchanges and established countries recover faster from pre-election nervousness, the Nigerian stock market continues to experience astronomical drops in share values, even after the election, according to the stakeholders.
Imafidon Adonri, Managing Director of Highcap Securities Limited, emphasized that insecurity and social disorder are deterrents to investing. According to him, people in charge of the polity, particularly politicians and executives, must be honest, follow due process, and perform effectively in order for the polity to remain peaceful heading into the election.
“There’s no reason for them to overheat it.” They don’t have to come up with frills that would produce conflict and crises because these are the factors that affect the capital market.”
He asked law enforcement officials to be more proactive, identify flashpoints, and put in place a strong security plan to avert law and order breakdowns throughout the campaigns.
Moses Igbrude, President of Issuers and Investors Alternatives Dispute Resolution Initiatives (IIDRI), echoed this sentiment, saying that because the country’s economy is still developing, everything happens in the political sphere must have a negative impact on the market.
The capital market, according to Adonri, is not immune to systemic events, but is primarily driven by systemic pronouncements and acts.
According to him, this is the perfect moment for politicians to refrain from acts and statements that may have a detrimental impact on the market.
He urged the political elite to be more restrained in their actions and statements in order to boost investor confidence and expand the economy.
Political intrigues ahead of the general elections in 2019 caused stock market investors to lose N729 billion in three months, despite consensus predictions of favorable results in 2018, when the once-struggling economy recovered from a recession at the end of 2017.
After a January surge sparked significant expectations amid improved macroeconomic data in both the domestic and global sectors, the months of fall happened between February and April.
Analysts attributed the market’s flattish appearance to the political turmoil that characterized the period. They claimed that herdsmen massacres and acts of political thuggery exacerbated investor disinterest, particularly among international investors.
During the same pre-election time this year, however, investors won nearly N5 trillion in four months, despite global economic uncertainty and increased insecurity in the country.
After languishing at a multi-year low, the stocks market has had an unprecedented uptick since the beginning of the year, emerging as Africa’s top performer and the world’s third.
The NGX’s All Share Index (ASI), which tracks the general market movement of all listed shares on the exchange, surpassed 53,000 for the first time since 2008, reaching a 14-year high, as indices climbed by N5.4 trillion since the start of the year.
For example, the ASI began the year at 43,026.23 points and ended the year at 52,908.24 points for the first time since 2008, representing an 18.7% increase, while trading for the year began on January 4 with N23.187 trillion and ended on Friday at N28.523 trillion, representing an increase of N5.336 trillion.
According to Patrick Ajudua, president of the New Dimension Shareholders Association, capital markets all around the world thrive on knowledge. “As a result, any unguarded speech has the potential to negatively impact the market.” As a result, politicians should be cautious about how they express their opinions, expectations, and assessments of the market.
“As politicians, we must keep in mind that the market is made up of domestic, international, institutional, and individual investors.” As a result of your statement, they will either stick with the market or ‘take the exit door.’
“The market also serves as a conduit via which the government, at all levels, can obtain cash for developmental or infrastructure projects.” As a result, it will be useless if the market is unable to perform its duty due to a pause caused by unguarded political comments.”
“My appeal is that politicians reflect on what happened in the 2015 campaign and its effect on the economy and be mindful of their campaign language because when they heat up the economy and create unnecessary panic and instability in the capital market and the economy, it will affect everyone,” said Eric Akinduro, President of the Ibadanzone Shareholders Association.