What To Expect As an investor in 2023
On the strength of Covid’s recovery at the start of the year 2022, we had a modestly bullish prognosis for 2022. We believed that the change in supply or demand-supply mismatch will moderate and that economic activity will start to build up in 2022.
But nobody was thinking about the conflict between Russia and Ukraine or the realization that Covid was still a problem in China. Africa bore the brunt of these two factors’ effects on global food and energy costs.
Wheat in particular is an important agricultural crop that both nations export to Europe as well as the world at large. The conflict’s escalation increased inflationary pressure on food prices that had been building for some time.
Africa will be impacted since it is neither immune nor insulated from what is occurring globally, and in a sense, Nigeria would be included in that. Without a doubt, the Nigerian economy and financial market were badly hit by inflation in 2022. To manage a successful portfolio in 2023, an investor cannot disregard several warning signs such as the soaring inflation rate, the interest rate dilemma, fluctuations in exchange rates, Naira devaluation, cost of stock market transactions, insecurity, and the effects of the coming election on the economy.
The global economy has suffered irreparable harm from inflation, which will have an impact on investment choices in the coming year. The Central Bank of Nigeria (CBN) increased the nominal anchor, also known as the Monetary Policy Rate (MPR), to 16.5% as one of the final alternatives to combat inflation. Despite having low purchasing power, the inflation rate increased to a 17-year high of 21.47 percent as of November 2022.
According to the National Bureau of Statistics, the Gross Domestic Product (GDP) of Nigeria decreased from 3.54 percent in Q2 2022 to 2.25 percent in the third quarter (NBS). The short-term profits from crude oil were insufficient to act as a cushion for Nigeria’s external reserves, which fell to $36. As of December 16, 94 billion. In the equivalent period of 2021, the reserve reached $40 billion.
The Naira dropped to 750/$ on the parallel market, down from 560/$ in 2021, and reached nearly 900/$ in November 2022, a sign of a struggling economy. Nigeria is hardly the only nation experiencing economic hardship.
For example, there are rumors that Goldman Sacks, a Wall Street behemoth, intends to lay off thousands of workers to “handle a challenging economic environment.” This supports the notion that Wall Street seems to be under pressure due to a decline in deal-making and falling revenues. 2023 is crucial and investment choices this year must be well thought through and strategic.
Examining the crystal ball, what should be the expectations of willing investors?
Here’s why Nigerian local equities would increase: In theory, the banks will profit from the current double-digit rate of interest on our government assets, which is currently between 14 and 15%. Second, due to the redesign of the currency and the announcement, part of the money that was not in banking circulation will enter the banks. This means that the deposits of banks will go up.
Concerning inflation, we should anticipate a slowdown. In terms of the exchange rate, we should anticipate that as the election draws closer, the parallel market will be going toward N800/$; nevertheless, the shared hope is that the rate does not break at N800/$. However, we should expect that it won’t remain there.
Because it is a one-time occurrence without any real demand to support it, the shared hope is that there will be a retracement. Due to the election, the demand is just transitory. In light of this, there will be a retracement following the election, subject to what the Government or the Central bank decides to do.
Speculators will control most of what occurs.
Pressing Issues for the Coming Government and What to Expect: Let’s examine three pressing topics the incoming government should address in the first 100 days. Security is number one. The North controls or has an impact on our production of food and supply chains, thus they must address security issues in a way that will lower food prices and potentially lower the overall headline inflation.
They also need to focus on rebuilding investor trust, not just in the domestic market but also abroad. Foreign investors no longer have faith in Nigeria’s policies or the future course of our currency.
Of the three major frontrunners in the coming election, every one of them is market-friendly hence, regardless of whoever is elected among them, we should expect a more business-friendly regime that will encourage businesses and bolster the economy.
Rising above fears and investing wisely: Most investors are afraid right now, and because asset prices are falling, many people are selling their possessions. Take GTB, Zenith Bank, Presco, Okomu Oil, or even MTN in our local market; while they have performed well, their prices have fallen precipitously.
Their current prices are quite appealing. But fear is the main factor preventing individuals from making purchases right now.
Here are some investment options you should consider if you want to protect your assets and increase your wealth:
- Local fixed-income market
Look for equities with reputable names to invest in on the local market.
If you look at it, that suggests the devaluation is less than one or two percent and that it will continue throughout the year. The hope is that the currency would remain constant in dollars between N750 and N770.However, your search for inexpensive local assets is, you have the option of purchasing fixed-income, regional stocks, and real estate..
