Financial Overview of 2023 and Insightful Investment Recommendations for 2024

As we bid farewell to 2023, a year that has been marked by both challenges and triumphs, the financial landscape in Nigeria reveals a tale of resilience and transformation. As we gear up for the upcoming year, REKIT Financial Advisors is excited to share insights and strategic investment recommendations to guide investors through the opportunities and challenges that lie ahead.

1.     Diversification Amid GDP Growth: In 2023, the economy of Nigeria has displayed commendable resilience, with the non-oil sector spearheading growth. The services sector, particularly finance and insurance, information and communication, and accommodation and food services, has exhibited robust gains. Considering this trend, we recommend diversifying investment portfolios to include sectors with substantial growth potential. Exploring opportunities in the flourishing non-oil segments can provide a hedge against uncertainties in the oil sector in 2024.

2.     Inflation-Resistant Investments: Inflation has been a key concern in 2023, reaching its highest point since 2005. To shield portfolios in 2024 against the eroding effects of inflation, consider allocating funds to assets that historically perform well during inflationary periods. Real assets like real estate and commodities may prove resilient, offering a safe haven against the rising tide of consumer prices. Additionally, exploring dividend-paying equities with a history of outperforming during inflationary periods could be a prudent move. Equities has a 41.07% performance Year-To-Date (Source: NGX December 14, 2023) which is higher than the current inflation of 27.33%; while the All Commodities Index (ACI) has returned 114.06% Year-To-Date (Source: AFEX December 8, 2023)

3.     Navigate Interest Rate Hikes with Caution: The Central Bank of Nigeria's decision to raise the benchmark interest rate to 18.75% underscores the effort to curb inflation and stabilize the currency. Investors should approach interest-sensitive investments with caution, considering the impact of higher borrowing costs on various sectors. While fixed-income securities may provide attractive yields in 2024, carefully assessing risk and duration is crucial. Exploring alternative investments with lower interest rate sensitivity could be a strategic move in this environment.

4.     Prudent Debt Management Amidst Economic Expansion: Despite the positive economic outlook, it is essential to keep an eye on the growing government debt. As the debt-to-GDP ratio inches towards 39%, a careful evaluation of fixed-income portfolios is advisable. In 2024, allocating investments to sovereign bonds such as Eurobond funds with manageable risks and diversifying across maturities can help mitigate potential downsides associated with rising debt levels.

5.     Population Growth and Investment in the Future: The population of Nigeria continues to grow steadily, presenting both challenges and opportunities. Investing in sectors that cater to the needs of a growing population, such as healthcare, education, and consumer goods, could yield substantial returns. Companies positioned to meet the evolving demands of a larger population may present attractive long-term investment opportunities.

“In balance, as we step into 2024, strategic and diversified investment approaches are key to navigating the dynamic economic landscape in Nigeria. By aligning portfolios with the evolving trends in GDP, inflation, interest rates, debt, and population, investors can position themselves for success in the coming year. At REKIT Financial Advisors, we remain committed to guiding our clients towards informed and prudent (local and foreign currency listed) investment decisions in money markets, fixed income, equities, commodities, real estate, high target savings and structured products ensuring a prosperous financial journey in the new year and beyond.”

6.     Navigating Business Environment Challenges:

The shifting business landscape in Nigeria in 2023 has witnessed the exit of several multinational companies, including giants like Unilever, GlaxoSmithKline (GSK), Sanofi-Aventis, Bolt Food, Procter & Gamble, and Equinor. Simultaneously, companies such as Surest Foam Limited, Mufex, Framan Industries, Moak Industries, Deli Foods, Stone Industries, MZM Continental, and Nipol Industries have reported the cessation of operations.

Smart Recommendation for Companies Operating in Nigeria:

Amidst these business exits and closures, companies operating in Nigeria need to adopt a proactive and adaptive approach to mitigate challenges and position themselves for sustained success in 2024 going forward. The exits also call for governmental partnerships with the private sector to ensure enabling operating environment for indigenous companies to replace the exited foreign ones thereby increasing gross domestic product (GDP).

Our strategic recommendations include:

a.    Adaptation and Innovation: Embrace agility and innovation to navigate the evolving business environment. Companies should constantly assess market trends, consumer behavior, and technological advancements to stay ahead of the curve. Innovation can open new avenues for growth and help in differentiating products and services.

b.    Strengthening Local Partnerships: Forge strong alliances with local partners and stakeholders. Collaborating between public and private sectors and between companies with established local businesses can provide insights into the intricacies of the Nigerian market and foster a deeper understanding of regulatory and cultural nuances while deepening the domestic market. Building resilient networks can be instrumental in overcoming obstacles.

c.     Sustainable Practices: Incorporate sustainable business practices to align with the changing expectations of consumers and regulators. Emphasizing environmental, social, and governance (ESG) principles not only contributes to corporate responsibility but can also enhance brand reputation and resilience in the market.

d.    Diversification of Revenue Streams: Diversify revenue streams to reduce dependency on a single market or product. Companies should explore opportunities in complementary sectors, tapping into the diverse needs of the Nigerian population. This approach can provide a buffer against economic uncertainties and sector-specific challenges.

e.     Risk Management and Scenario Planning: Implement robust risk management strategies and engage in scenario planning. Anticipating potential challenges and having contingency plans in place can enable companies to respond effectively to adverse situations. Regularly reassessing risk factors ensures a proactive rather than reactive stance.

In conclusion, these strategic moves will not only help companies weather challenges but also position them for long-term success in the dynamic Nigerian market. At REKIT Financial Advisors, we advocate, engage with, and provide business decision-makers with unbiased, evidence-based, forward-thinking measures, and a resilient approach to business operations in the ever-evolving economic landscape.

As we out up the shutters on 2023 and pull up the blinds at 2024, REKIT Financial Advisors extends warm wishes to our valued readers and clients. May the new year bring prosperity, resilience, and abundant opportunities for you and your investments. Cheers to a year of strategic growth and financial success ahead.

Contact: info@rekitadvisory.com or call us on +234 (706) 210 6633.