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Analysts predict low investment this year

By on January 7, 2014

Economic and financial analysts have said that 2014, being a run-up to the election year in the country, is a waiting period for most investors as they will like to see the direction the country will go before making any investment decision.

According to the experts, the pre-election year is a trying period and most investors will watch with keen interest as events unfold in the political and economic landscape of the country.

Analyst and Director at DLM Investments and Securities, Mr. Idowu Ogedengbe, says although a lot of activities in the year will be dependent on the budget, political activities will still dominate the country.

He said, “This year is the run-up to the election, so investors are sceptical. There are quite a number of people that are looking from the sidelines.”

Ogedengbe noted that there would be so much spending this year as political activities would take the centre stage.

He, however, hoped the government would also pay attention to the economy, rather than political activities alone.

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, equally posited that this year would be a time most investors would rather want to wait and see events unfold in the economy, especially the political aspect due to the elections coming up in 2015.

However, he noted that much spending due to political activities would translate to much consumption, adding that the development would lead to a boom for consumer goods companies.

Rewane pointed out that he was not too sure if there would be much jobs and investments because 2014 is a pre-election year.

He explained, “Jobs are a function of capital formation, and the level of capital formation in 2014 may not be as high as envisaged because all the focus will be on electoral activities. New investments will come in 2015; year 2014 will be a year of wait-and-see.

“What you see in 2014 will be the result of what happened in 2013. So, the jobs you see in 2014 are the results of the investments you saw in 2013. The question you need to ask is what were the investments made in 2013? If there were no new major investments in 2013, you may not see the result.

“But in 2014, if the people are clear that the political situation has improved, then they will begin to invest; you will see the effect in 2015. 2014 is not going to be a bad year, it’s not going to be different from 2013, just that growth will be higher and business activities will be more because of the election activities.”

But Ogedengbe said the coming on board of a new governor of the Central Bank of Nigeria by June when the incumbent, Mr. Lamido Sanusi, leaves, should usher in a new monetary policy.

According to him, Sanusi’s tight monetary policy stance did not help growth and investments as the policies affected the growth of the real sector.

“The CBN’s tightening monetary policy stance did not really help the economy. We expect a new CBN governor to provide liquidity in the financial system. We expect him or her to relax the monetary policy to provide money for the real sector to enhance job creation.

“We also expect the reforms in the power sector to start yielding results this year. Once the power firms kick off, we expect to begin to see the effect on companies by way of increased profitability occasioned by reduced operating cost,” Ogedengbe said.

For Rewane, the next CBN governor will have to align monetary policy with monetary conditions because there is a difference between the two.

The FDC boss said he knew the monetary policy in 2014 would change in line with the new players in the Monetary Policy Committee occasioned by the change in the leadership of the CBN.

Rewane said, “More importantly, we must note that the Nigerian currency is already coming under pressure. Some things will have to happen to support the currency. The high Monetary Policy Rate didn’t go well for some people like manufacturers, but they also benefitted from it. What they lost in terms of high lending rates from banks was gained in a stable exchange rate. They were able to bring their goods in at fair prices.

“The MPR is an indicative rate; it is a benchmark rate which other rates are tied to. So, if that rate moves in any direction, it will move other rates. However, we are moving into a new monetary policy era. There will be a new committee, so we don’t know what will happen.”

Sanusi has, however, reportedly argued that relaxing the monetary policy makes no meaning if there is no electricity to power the real sector.

He also said that keeping a stable naira and exchange rate were very crucial to the economy.

[Punch]