February

In line with tradition, February 2009 was a much better month than January. The volume and value of transactions was higher. A total of N37 billion was exchanged compared to N29.8 billion in January. However, the amount was a far cry from the N375 billion that was exchanged in February 2008 (an all time record). The NSE All Share Index closed at 23,377 up 7.2%. This is the first time since February 2008 that the Index has closed higher the following month.

Unfortunately, the gains made in February have since been eroded in March. As at 13th March, the Index has dropped to 21,003 a new 52 week low and a decline of 10.2% compared to February.

In my view the outlook for the capital market does not look very good for the rest of the year. I base my opinion on the following:

- Very tight liquidity which has resulted in high deposit and lending rates. This liquidity will not ease up quickly especially with the adoption of December uniform year end at the end of this year.

- A depreciating Naira as a result of policy inconsistency from the Central Bank. This means more Naira is required to fund imports further worsening liquidity.

- High inflation which is usually not good for companies and individuals since it discourages long term investments.

- Gloomy economic outlook: Low oil price, reduced production due to OPEC quota and high government deficit. Due to the deficit the government will need to borrow locally to fund the shortfall. This will further reduce the funds available to the private sector and continue to impact negatively on cost of funds.

I therefore advice a long term view for any investment on the NSE. I expect the All Share Index to close down this year. The Index needs to go up at least 50% to close even for the year. I believe that is a tall order given the points outlined above.

For the long term patient investor, now is the time to look for quality stocks at reasonable valuations. For the trader, trade with caution.