Share prices to ride on back of investment inflow

This development is likely to boost activities and share prices in the local market, creating opportunities for investors who take positions now that the bears are mounting the saddles.

Musa Elakama, assistant director general of the Nigerian Stock Exchange, disclosed this in a recent interview with Business Day in Lagos. Elakama was reacting to insinuations of overvaluation of stocks and a possible burst in the market.

He said the previous bullish runs in the market would be a child’s play compared with what would happen soon.

The assistant director general believes that the Nigerian market is still young and growing compared with developed markets that have reached their peaks. To convince doubting Thomases, Elakama said his calculation was based on the fact that the highest priced stock on the stock exchange was still less than one British pound.

As a confirmation of his posture, the London Stock Exchange (LSE), in collaboration with some UK-based fund managers and market operators, had held a conference for Nigerians that would like to raise money from the LSE.

Ina De, managing director of JP Morgan, said in spite of the risk associated with emerging markets, the Nigerian capital market had become a preferred investment destination.

Micheal Lynch-Bell, partner in charge of initial public offering services, Ernst and Young, said the sovereign credit ratings given Nigerian by Standard and Poor’s as well as Fitch had properly positioned the country for strategic investors.

Elakama advised portfolio investors to exploit the opportunities created by the current low prices, but warned that stock prices would barrel from next year in response to continuing economic reforms and better results from companies.

Interim and final results from companies are already showing encouraging performances. For example, Dangote Sugar Refinery’s unaudited result for the third quarter ended September 30 , 2007 puts profit after tax at N17.85-billion , a 37.9 percent growth when compared with N12.9-billion during the same period in 2006.

Similarly, Nigerian Bottling Company reported an unaudited turnover of N34.13-billion for the half year ended June 30 2007 against N30.4-billion the previous year. Profit after tax leaped to N1.7-billion from N0.502-billion. The directors of Guinness are recommending N4.50 per share dividend for the financial year ending October 19 2007.

Elakama also cited the growing foreign interest in the Nigerian capital market.