Investment Strategies from Major Policy Reforms in 2023
Anchored by a new captain, the voyage, which is the Nigerian economy has now pointed its rudder at another direction evidenced by the series of reforms that now suggests that a favourable business environment might be in the offing. The touted outcome of this new turn over the years have included among others, attracting foreign investment, and enhancing the overall Nigerian economy. Four notable policies have emerged since the inception of this new leadership: FX liberalization, removal of PMS (Premium Motor Spirit) subsidy, the Electricity Act 2023, and the enactment of Executive Orders.
While the disconcerting fiscal state of the nation had started getting long touted reprieve in the form of subsidy removal, two of the prominent concerns which have posed as the Achilles heel of the economy in FX management and electricity have also received a new lease of life. The FX unification and the subsequent floating are expected to enhance efficiency and liquidity in the market, attract foreign investors, and eliminate the irrational arbitrage opportunity in the space. Furthermore, the removal of PMS subsidy is a crucial step towards addressing fiscal challenges and reallocating budget resources towards infrastructural development. Furthermore, the Electricity Act 2023 is expected to focus on revitalizing the power sector through private sector participation and reliable electricity supply. Finally, the Executive Orders revamp the Finance Act signed by the previous administration and improves business activity.
Although some of these policies have faced significant opposition from citizens for how they might not be enough to address Nigeria’s hydra-headed macro-economic concerns, we believe that they bode well for capital market traction. Therefore, this report provides capital market strategies that investors can employ amidst the series of new economic policies being implemented.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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