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Meristem Research 2024 financial analysts are optimistic about a potential upgrade and reclassification of the Nigerian capital market in 2024 by major global indices such as MSCI and FTSE Russell.
Following the previous downgrade of the Nigerian equities market by FTSE Russell and MSCI’s plans to reclassify it, analysts foresee an upgrade in 2024 based on the expected improvement in macroeconomic fundamentals.
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The anticipated upgrade is seen as a positive development for investor sentiment, leading to a search for value in the equities market. Despite lingering concerns about macroeconomic variables like inflation, exchange rates, and potential monetary policy hikes, analysts believe the market will maintain a positive outlook.
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In 2024, analysts expect a focus on corporate actions and new listings, particularly in the oil and gas and banking sectors.
The potential listing of Dangote Refinery and selected government entities is anticipated to drive significant market activity, attracting both domestic and foreign investors.
In the banking sector, the proposed recapitalization is likely to lead to increased equity raises through right issues and potential mergers.
This, in turn, should act as an incentive for investors and stimulate buying activities across tickers in the banking sector.
Despite concerns about the recent reclassifications by FTSE Russell and MSCI, attributed to foreign exchange liquidity challenges affecting investor confidence, analysts remain optimistic about the market’s positive outlook in 2024.
Lamido Yuguda, Chairman of the Capital Market Committee (CMC) and Director General of the Securities and Exchange Commission (SEC) in Nigeria, acknowledged concerns about the recent reclassifications of Nigerian securities indices by FTSE Russell and MSCI.
These reclassifications were attributed to existing foreign exchange liquidity challenges and their impact on investor confidence.
However, the positive expectations for an upgrade in 2024 are rooted in an outlook of improved macroeconomic fundamentals. Analysts specifically anticipate a likely reclassification from FTSE Russell during its annual review in September 2024.
This optimism is driven by the belief that the reasons given for the previous downgrade will show signs of improvement.
