FSL Securities Limited envisions a surge in bond activities for the current year, propelled by the Federal Government’s ambitious endeavor to address the substantial N9.18 trillion budget deficit. This deficit, a pivotal aspect in realizing the country’s growth targets, is anticipated to catalyze increased engagement within the bond market.
During the FSL Securities’ Economic Review and Outlook for 2024 event-themed “Navigating the Tides,” Victor Chiazor, the Head of Research and Investment, emphasized the indispensability of private sector involvement in addressing the budget deficit. He articulated, “We anticipate heightened activity in the bond market throughout the year, driven by the imperative to secure funding for the deficit budget. The private sector is poised to play a crucial role in this market segment.”
Chiazor also highlighted the evolving dynamics in state bonds, acknowledging a diminishing appetite for these instruments. However, he foresaw an exception for states boasting substantial revenues, positing they might tap into the bond market, particularly in light of ongoing reconstruction efforts associated with certain state bonds.
Focusing on the broader economic landscape, Chiazor forewarned that the federal government would grapple with elevated debt levels in 2024. The debt-to-service ratio, deemed significantly high, poses a notable hurdle in navigating the economic terrain.
Chiazor painted a nuanced picture of the financial markets, suggesting that replicating the stellar performance observed in 2023 might prove elusive for the equities market. He attributed this potential struggle to a predominance of domestic players, speculating that foreign investor interest could dwindle. Key factors influencing the market’s trajectory include the Central Bank of Nigeria’s (CBN) dovish stance and corporate performance.
Delving into the specifics, Chiazor pointed out that the equities market is poised to be significantly influenced by the CBN’s monetary policy, which is anticipated to adopt a mixed approach in 2024. While the fiscal authority’s visibility is expected to improve over the year, the monetary policy outlook remains contingent upon ongoing developments. The CBN, in particular, will closely monitor unfolding events, deciding whether to implement an expansionary or contractionary monetary policy based on prevailing economic circumstances.
In essence, FSL Securities Limited’s outlook for 2024 revolves around the interplay of factors such as the budget deficit, private sector participation in the bond market, state bonds, the federal government’s debt challenges, and the intricate dynamics shaping the equities market. As the economic landscape evolves, the role of both fiscal and monetary policies becomes increasingly pivotal, shaping the trajectory of financial markets and overall economic stability.
