Afrinvest highlights investment outlook, opportunities for 2023

Afrinvest West Africa has outlined investment outlook  for 2023 and how investors can explore the opportunities and guide against threats expected in the new year.

Speaking during the investor parley held on Wednesday in Lagos with theme: ‘Soft or Hard Landing,’ Group Managing Director, Afrinvest West Africa, Ike Chioke, said the event was to engage with clients on the 2023 outlook from the investment perspective.

He said that issues around inflationary trend, COVID-19, commodity prices, Russia and Ukraine war, among others are key considerations in investing in the new year and investors have to be guided to explore opportunities presented by these key events around the world.

“These happenings have made investment experts come together to look at our own crystal ball of what we see from an investment perspective next year. So, this forum is just to engage with clients, asset managers, pension funds managers, mutual funds managers to engage and compare notes on what we do,” he said.

According to Chioke, Afrinvest Consulting manages the investment research unit, and its fixed income, equities and digital space experiences put it in a good position to advise on the investment in 2023.

“The interaction is giving us the rationale to talk to our clients to tell them to be well positioned for the market come 2023.

“We are saying — Is it going to be a hard landing, or soft landing? In either scenario, investors need to be ready and decide when to enter the market and when to exit,” he stated.

He explained that it is one thing to enter into the market, and another thing to have good returns and make some profit for the year.

“So, 2022 is pretty much done, we are looking at 2023 and what it portends for investors. I think that from our perspective from the forex point of view, we still have a complex exchange rate policy in our view, with multiple windows through which investors can access dollars,” he said.

Chief Business Officer, Optimus by Afrinvest, Ayodeji Ebo, said that a high interest rate environment presents opportunities to investors.

He said that it may present a negative position to the borrower but looking at it from the investor’s perspective, it means higher returns, which will reduce the bleeding that most investors suffer as a result of higher inflation.

“So, we know where the interest rate was in the early part of this year, but we see that that gap is reducing. The negative real return on investment is reducing. So, we believe that from the fixed income angle, risk free investment such as the treasury bills presents opportunities,” he stated.

He said such instruments will present higher returns to investors, remain safe because the government will not default on its obligation.

“We believe that investors are safe in investing in government instruments and blue chip commercial papers. From the equity’s perspective, there are still a lot of volatilities, so there is that negative relationship between the fixed income and the equities which is normal. The equities become less attractive when the fixed income interest rate is going up and is attractive,” he disclosed.

Ebo said investors can also look at it from a dividend yield perspective which is the return on investment.

He said that for investors that go through the conservative approach, dividend yields have increased to an average of about 12 to 15 per cent for the stock as a result of the decline in prices.

“When you look at the financial performance of the companies, if they sustain last year’s dividend relative to current price, the yield will be close to 15 per cent. So that’s another opportunity that investors can explore,” he stated.

Encouraging more people to invest their funds, Ebo said that inflation is real, and reduces people’s purchasing power.

“So even if the interest or the return you’re getting on your investment is not as much as inflation, doing nothing will make you worse off. By investing, you are likely to reduce the impact of inflation on your savings and investments,” he stated.

Managing Director, Afrinvest Consulting, Abiodun Keripe, said the end goal of the event is to intimidate market participants both at the buy and sale sides, with some of the trends in 2022 and provide insight and perception about 2023 in terms of how to allocate portfolio, strategise and plan for the investment climate in 2023.

He said the platform is to tell the average Nigerian to be very cautious because the next year is an election year where there will be elevation in uncertainties.

Keripe said that investment decision making can be influenced by so many variables, hence the need for investors to be cautious about how to invest.

He said although inflation is running far ahead of returns, that should not deter investment.

“Assuming you are able to make an investment where you earn between 10 to 20 per cent, what that means is you have been able to cut down your actual cost of living by 10 per cent. In real terms, your exposure to inflation is moderated by the extra income from investing, which is more important than you just taking inflation 100 per cent,” he added.

Also speaking, Chief Investment Officer, Afrinvest Asset Management Limited, Robert Omotunde, said that in terms of diversifying one’s portfolio from a currency perspective, it is one of the critical strategies that investors need especially in an environment where inflation is hyper, say, hyperinflation within countries.

Such a move, he said, would enable investors to beat inflation and make good returns on their investments.

Although there are laws within the country that prevent dollarisation of the economy to avoid putting pressure on the local currency, for investors with dollar inflows, such investment is advisable.

“It makes sense to take advantage of dollar investment opportunities for investors with dollar inflows. There are a number of portfolios or opportunities that you can take in different asset classes,” he said.

According to Omotunde, “there is no over emphasising the point that investors that are going to beat inflation, and get superlative return, more so as 2023 beckons, such investors need to consider diversification by currency and U.S. dollars is a major currency diversification that we preach.”