Nigerian Equities Face Risks of Correction in 2024 – Analyst

Fund manager Cowry Asset Management has projected a potential downward turn for Nigerian stocks in 2024 following last year's massive rally, flagging risks like overvaluation and USD safety flows.

Key Insights

  • Cowry Asset Management MD expects potential downward price adjustment in Nigerian stocks amid 2023 rally.
  • Overvaluation, fixed income yield rises, economic woes, and USD asset pivot among triggers projected.
  • Advises focusing on value rather than trends in tricky conditions, with banks, industrials, oil/gas offering prospects.

LAGOS – Nigerian stocks may see a price adjustment this year after significant gains in 2023, according to Johnson Chukwu, Managing Director of Lagos-based Cowry Asset Management.

In a market outlook report, Chukwu said various factors could trigger a southward turn, including overvaluation of some stocks beyond intrinsic value, expectations of higher fixed income yields luring investors away, and Nigeria’s weak economic state denting corporate profits.

He noted high net worth individuals and institutions are pivoting to dollar assets to preserve wealth, which could also sway equities.

Read also!Β Nigeria 2024 GDP forecast cut to 3% by IMF

According to Chukwu, the banking, industrial, construction and oil/gas sectors still offer reasonable prospects. But he advised investors focus on value rather than chase trends, amid tricky conditions.

Nigerian stocks surged almost 32% last year to record highs, with industrials like Dangote Cement and BUA Cement recently fueled by strong buying interest.

But Chukwu cautioned unfavorable economic realities and asset rebalancing could make gains harder to sustain at current valuations.

His call for caution comes as fixed income yields rise globally while Nigeria grapples with double-digit inflation and anemic growth, prompting investors to safeguard funds in USD assets more.

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