Last week, President Buhari reappointed the CBN governor – Godwin Emefiele – for another 5-year term in office. The reappointment which was confirmed by a letter sent to the Senate for legislative confirmation marks the first key strategic economic decision made b y President Buhari since his re-election in Feb-19.
Analyzing market reactions to the news, the fixed income market responded somewhat positive as yields on fixed income instruments on Friday (a day after the announcement) trended lower across the board, owing to increased demand by foreign investors evident in the high influx of FX recorded on the I & E window during this period. Notably, the total amount of FX traded on the window on Friday settled at $367.2mn, accounting for 3 7.8% of the total FX turnover for the week. For the equities, the bearish theme that characterized the market – even before the announcement – continued, as the All-share the index dipped further by 0.2% on Friday, predicting a weaker YTD return of -8.2%.
Overall, the reappointment of the CBN governor signals stability in the monetary policy environment and points to further support a consistent exchange rate policy – which could predicate increased confidence for fixed income investors. Nonetheless, the likelihood for reforms to stay tepid implies thatactivities in the equity market may continue bearish in the interim.
United Capital Plc Research