The future looks bright for the banking sector, as economists have predicted that it is one of the sectors that will excel in 2013.
The banking sector, according to Bismarck Rewane, managing director/CEO, Financial Derivatives Company Limited, accounts for 31 percent of market cap.
Buying opportunity at price-to-book (PB) ratio of 0.93x and dividend yield of 5.88 percent and price-to-earning (PE) ratio of 5.92, earnings quality improved as banks balance sheet is robust following the sector’s clean-up. Other sectors include power sector, which will excel on completion of privatisation process, existence of a strong policy framework and multilateral agency support for the reform process and review of tariff structure that will ensure an efficient price discovery system.
And the construction sector is projected to grow by 17 percent in 2013, boosted by substantial growth in earnings from increased infrastructure spend and capacity increase of major players.
On the other hand, regulators of the Nigeria capital market need to improve on their oversight functions to check market infractions, Sewa Wusu, head of markets, Sterling Capital, said.
Speaking at the weekend during the Finance Correspondents Association of Nigeria (FCAN) Roundtable on the Economy held in Lagos, he said there was also urgent need for application of more risk-based supervision as such would entrench corporate governance and deal with market infractions.
Wusu said despite pessimism that sufficed in the early part of last year, the Nigerian market closed with a return of 35.45 percent while market capitalisation rose by 37.37 percent from N6.532 trillion, at the beginning of the year to N8.974 trillion.
The performance was an improvement over the lull experienced in 2011 when the market witnessed a negative return of -17.42 percent, Wusu explained, but regretted that at the global arena, not all markets have recovered when compared to their 2008 levels when the markets were at their peak.
He said foreign participation accounted for over 65 percent of total volumes of trades within the year in Nigeria, while advocating for improved domestic participation to build enhanced market confidence. This, he said, can be achieved by collective investment schemes, increasing equity allocation of Pension Fund Administrators (PFAs) and creating a pool of special fund at compelling rates for market makers.
He also called for more listings in the oil and gas, telecom, power sectors and other privatised entities in the economy as well as increase activities of sub national and municipals in the bond market.
Wusu called for more risk-based supervision and enhanced oversight functions by regulators as such would entrench corporate governance and deal with market infractions.
“Given the level of performance in 2012, the capital market is expected to witness another impressive performance this year. Performance will be driven more by strong macroeconomic environment, good corporate performance and companies’ fundamentals. Expected monetary policy easing in 2013 should induce investment switch to favour stock market even as bond issuance by sub nationals would continue,” he said.
Also, Bismarck Rewane said, “the gross domestic product (GDP) rebasing is expected to take place this year,” such would alter the base year to 2008 from 1990, and will also add N400 billion to the GDP.”
The GDP is currently estimated at $273.8 billion. He said by carrying out the exercise, Nigeria would be emulating Malaysia and South Africa that rebased their GDPs from 2000 to 2005 each and Ghana - from 1993 to 2006.
He said rebasing the GDP would make the rich richer and poor poorer, while the country’s growth trajectory will decline.
The GDP is the market value of all final goods and services produced within a country, calculated by using product, income and expenditure approaches.
According to Rewane, real GDP is one that is adjusted for inflation, while nominal GDP is the value of goods and services based on current market prices.
He further explained: “Gross National Product (GNP) measures the value of goods and services produced by a country’s citizens, regardless of their location while Gross National Income (GNI) is GDP plus income receipts minus income payments from the rest of the world.”