Co-Managing Partner at Aztran Limited, Efosa Aluyi, has said the recent decline in Nigerian equities has created attractive buying opportunities, but warned that uncertainty surrounding the Nigerian Exchange’s transition to a T+1 settlement cycle must be resolved to restore investor confidence.
Speaking during an interview with ARISE NEWS on Thursday, Aluyi said recent market losses have left several stocks trading at attractive valuations for long-term investors, despite continued uncertainty over the settlement policy.
“From a value perspective, there is still great value in the market. Some of these stocks are beginning to look quite cheap, but the policy issue needs to be resolved.”
He urged retail investors with a long-term investment horizon not to panic over the recent correction.
“If you have long-term money, there is absolutely no reason to panic because there is still significant value within the market.”
Aluyi attributed the market downturn to uncertainty surrounding the NGX’s transition from the T+3 to the T+1 settlement cycle, saying the policy has unsettled investors, particularly foreign portfolio investors, despite its intended benefits of faster trade settlement and lower counterparty risk.
“The entire month of June was quite bearish. Since the policy was introduced on June 1, the market has lost nearly 15%, pushing us into correction territory.”
He explained that while the new settlement regime is designed to improve market efficiency, it has created operational and funding challenges for investors operating across multiple jurisdictions.
“T+1 looks good on paper because trades settle faster and counterparty risk is reduced, but it creates operational and funding challenges, especially for foreign investors dealing with different time zones.”
Addressing concerns raised by FTSE Russell over Nigeria’s market classification, Aluyi said the country must strengthen both its foreign exchange market and trading infrastructure to support the new settlement cycle.
“Markets that have implemented T+1 have impeccable operational systems. Nigeria has improved on the FX side, but the market still needs stronger infrastructure and funding solutions.”
He added that uncertainty over Nigeria’s prospects for global index inclusion has prompted foreign portfolio investors to reduce their exposure to Nigerian equities, while domestic investors remain cautious.
“Foreign investors are reducing their exposure because the expected catalyst of index inclusion is now uncertain. Local investors are also waiting to see how the T+1 situation is resolved.”
Looking ahead to the second half of the year, Aluyi said policy clarity would play the biggest role in determining market performance, alongside corporate earnings and global economic conditions.
“It is a cocktail of factors, but the pendulum swings more on the side of policy. Once the settlement issue is resolved, earnings and other fundamentals will support sentiment.”
He also expressed optimism about the industrial goods, banking and oil and gas sectors, citing strong corporate earnings, infrastructure spending, banking recapitalisation and ongoing energy sector reforms as key growth drivers.
On the broader outlook for the Nigerian stock market, Aluyi maintained that the market remains fundamentally strong despite short-term challenges.
“From a macro perspective, we’re on the right track. While pre-election periods usually bring cautious trading, the market continues to offer attractive long-term value, provided concerns over the settlement cycle are addressed.”
Goodness Anunobi
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