As the National Assembly begins a public hearing on the 2017 Budget, finance experts and capital market analysts have expressed optimism that the budget will give a lift to market performance and further boost investors’ returns.
Specifically, they said sectors like construction will recieve further boost once government begins releases of the N529 billion capital vote for the ministry of works, power and housing.
According to the experts, agricultural sub-sectors of the Nigerian Stock Exchange (NSE) will be the biggest beneficiaries of the development.
The analysts informed that quoted companies that will likely benefit under the construction subsector include: Arbico, Costain, G. Cappa and Julius Berger, while under the manufacturing sub-sector, Dangote Cement, Larfarge, Benue Cement and CCNN will benefit immensely.
Projected to reap under the agricultural sub-sector due to the expected impact of the budget include FTN Cocoa, Okomu Oil, Presco and Livestock. Okomu Oil and presco on the NSE are trading above N40 per share.
It would be recalled that head of Economic Research and Policy Management Division of Securities and Exchange Commission (SEC), Afolabi Olowookere recently at the 2017 Budget seminar organised by the commission in Lagos said manufacturing, trade, works, power, housing and transport sectors would benefit much from the federal government 2017 Budget if well implemented.
Olowookere said that listed equities of the sectors would perform better in 2017 because of the budget’s focus.
He said that stocks of these sectors would lead the capital market in 2017, noting that the major challenge would, however, be high cost of capital.
According to him, financial companies and services firms that serviced the sectors would indirectly benefit from the budget.
He also said that stocks of companies, supplying government materials or working for government, would benefit from the budget indirectly. He however stated that the budget would affect the market directly or indirectly adding that the Nigerian Stock Exchange (NSE), All-Share Index which declined by 6.17 per cent in 2016 would do better this year.
He observed the need to improve domestic investor participation in the market, noting that, foreign investors would further shun the market due to foreign exchange challenges. “The budget deficit of N2.36 trillion will have negative and significant effect on the equities market,”
He disclosed that review of the pension investment laws was necessary to increase the activities of the Pension Fund Administrators (PFAs) to increase institutional investors’ participation.
On the roles of capital market in budget planning and processes, he said that the market could provide platform for the sale of government shares during participation.
He said that proceeds realised from privatisation could be used for budget financing.
He called on market stakeholders to introduce alternative investment schemes such as infrastructure financing to deepen the market.
Olowookere said that the 2017 Budget, if well implemented, would return the economy to expected growth and recovery.
Also, managing director of Highcap Securities Limited, Mr. David Adnori also revealed that companies listed under construction and agriculture sub-sector will be the biggest beneficiaries, saying that the budget has a way of reflecting on all the companies and economy as a whole.
“Investors should key into the counters of companies that are positioned to benefit from the infrastructural and developmental investments of the federal government,” he said.
He expressed optimism on the performance of the agricultural sector over the short to medium term, given the relevance of the sector to economic growth and the increased focus of the current administration on same.
He also pointed out that the industrial goods stocks are not left out in anticipation of increased demand for building materials, as the federal government commences its infrastructural development drive.
Also, the managing director of APT Securities and Funds Limited, Mallam Kurifi Garuba notes that looking at the budget, there is provision for infrastructure, the construction and cement companies, all of which will benefit.
Garuba said, under the construction sub-sector, Julius Berger, G Cappa, Road Nigeria, Costain will all benefit, saying the cement industry will equally benefit. “Once there is more of demand of infrastructure, there will be high demand of cement” he noted.
He pointed out that sectors that provide the basic goods will also benefit indirectly, noting that the agriculture sector is doing well, not necessary because of the budget but due to the major reform in the sector.
The director-general of the Securities and Exchange Commission (SEC), Mounir Gwarzo, on his part has said that the federal government’s 2017 Budget was aimed at increasing the country’s productive sector spending.
He said, “We believe that the government budget for 2017 is a very promising budget. It is clearly a budget that is aimed at solving some of our problems. And I think the path government has taken is in my opinion the right part.
According to Gwarzo, “From an economic point of view, when a country is in recession there are basically two economic models that you use in solving that recession.
“You either use what we call the classical model, or some people call it the monetary model. The classical model emphasizes on using the monetary policies, interest rates and exchange rate to address the recession.
“The other model is what economist call the Keynesian model or some people call the fiscal model where government will now use fiscal interventions in terms of spending to reflate the economy, and I think that is what this government is looking at using the fiscal aspect by increasing spending.
“By the time you increase spending the disposable income of people will go up, by the time it goes up there will be savings and when there is savings there will be investment. And investment will now create growth and I think that is the focus of this budget which to us is something that is in the right direction.”
Gwarzo said the government was also revitalising the commodity exchange in line with its efforts to diversify and grow the agricultural sector.
According to the NSE DG, agriculture is the main stay of any economy, adding that history has shown that no country has actually progressed by relying only on the oil sector.