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Investors React Positively to Tinubu’s Economic Policy Direction As Nigerian Stock Market Gains N1.51tn, Naira Appreciates

This was just as sovereign dollar-denominated bonds rallied.

Investors in both the equities and money market responded positively on Tuesday to the pronouncements by President Bola Tinubu in his inaugural speech.

Specifically, the stock market appreciated as investors gained N1.51 trillion, apparently in response to Bola Tinubu’s signalling of plans to unify foreign exchange rates. Also, the naira appreciated on the parallel market as it gained N5 to close at N765/$1 on Tuesday, up from the N770/ $1 it traded the previous day.

This was just as sovereign dollar-denominated bonds rallied.

The market capitalisation opened for trading at N28.845 trillion on Tuesday, gaining N1.51trillion or 5.23per cent to close at N30.350 trillion, while the NGX All-Share Index gained 5.23 per cent or 2,764.47 basis points to 55,738.35 basis points from 52,973.88 basis points it opened for trading.

 The 5.23 per cent recorded on Tuesday was the biggest single-day gain since November 12, 2020.

Tinubu in his inaugural address had commended the decision of the outgoing administration of President Muhmmadu Buhari in phasing out the petrol subsidy regime which has increasingly favoured the rich more than the poor.

Tinubu had said: “Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions.”

He added that, “The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.

“Interest rates need to be reduced to increase investment and consumer purchasing in ways that sustain the economy at a higher level.”

According to industry experts and multilateral lenders like the International Monetary Fund (IMF), the harmonisation of the rates and removal of subsidy would improve the attraction of  foreign capital and also help the government channel useful funds into more productive ventures like infrastructural investment, education and healthcare.

In on Tuesday stock market trading, the market breadth index was significantly positive with 64 gainers against 12 losers. Eight stocks including Transcorp Hotels Plc, Jaiz Bank Plc, Nigerian Breweries, Eterna, Zenith bank, FCMB Group, Sterling Bank and Deapcap gained 10per cent to top gainers on Tuesday.

Access Corporation added 8.33per cent to close at N12.35 per share, becoming the most actively traded stock with about 200 million units of shares worth about N2.4 billion.

Sector Performances revealed that the  NGX Banking Index expanded by 8.20 per cent, driven by the gains printed in Sterling Bank, Zenith Bank, and Jaiz bank which gained 10 per cent ,respectively.

The NGX Industrial Index advanced by 7.41per cent, on the back of the positive sentiment seen in Dangote Cement which rose by 7.41per cent, Lafarge Africa appreciated by 6.52 per cent and Berger gained 5.75per cent.

NGX Consumer Goods Index rose by 6.41per cent, caused by the increase in prices of Nigerian Breweries (+10 per cent), Dangote Sugar (+9.50per cent) and Nascon (+9.42 per cent).

In addition, NGX Oil and Gas Index increased by 4.04per cent, due to the bullish trend observed in ETERNA (10 per cent), CONOIL (+9.91 per cent) and Total (+9.24 per cent).

According to analysts at InvestmentOne Research, “The local bourse closed positive today due to the buy-interests recorded across major sectors.

“Going forward, we expect investors’ sentiments to be swayed by the search for real positive returns and developments in the interest rate space.

 “We reiterate that this may be a great period to pick up some quality names with a medium to long-term investment horizon.”

Prof. Uche Uwaleke of Nasarawa State University, in chat with THISDAY backed the move by this present administration to remove petrol subsidy.

Uwaleke said fuel subsidy have proven to be unstainable. He also supported the unification of exchange rates in the country. According to him, “I equally support unification of exchange rates because doing so will discourage round-tripping, and bring more transparency to the forex market which supports foreign investments.

“However, in order to minimise the negative impact on the livelihoods, issues of fuel subsidy and exchange rates unification which he mentioned in the speech should be handled with care.”

He, thus, calls for stakeholders’ engagement in the new administration.

“To this end, I suggest an immediate constitution of an ‘economic policies’ coordinating committee’ made up of economic and finance experts,” he added.

Deji Elumoye, Onyebuchi Ezigbo, Emmanuel Addeh, Emameh Gabriel, Udora Orizu in Abuja, Nume Ekeghe, Peter Uzoho and Kayode Tokede in Lagos

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