The performance of the stock market under any President is often considered a barometer for the level of investor confidence in the fiscal and economic policies of his/her presidential administration.
But 6 years and 2 economic recessions into President Buhari’s democratic administration, the stock market has posted an annual average return of just 6.07 percent.
Despite 2020 being the best year for stocks since 2007, the 50 percent market return achieved in 2020 could only help boost President Buhari’s average stock returns to barely 6 percent in his first 6 years as President, placing him behind President Jonathan who managed a meagre return of 8.6 percent and President Obasanjo who posted an average annual market return of 29.5 percent.
While most Presidents can do very little to transform the economy in first years as President, the economic performance of those years are still credited to them as investors’ display confidence in the long-term economic vision of the President by entering a buying frenzy in the stock market and pushing prices higher.
In 2015, President Buhari became the 4th democratic President of Nigeria after defeating incumbent President Jonathan in the 2015 General Elections. Interestingly between January 2015 to April 2015, stocks had climbed 17 percent in the first four months of the year as investors were probably anticipating a Jonathan victory in the polls.
However, after Buhari won the Presidency and was sworn in as President in May 2015, stocks declined an equivalent 17 percent between May and December 2015 as investors’ sold off their stocks echoing low confidence in the President’s economic policies.
“Stocks were also pressured by headwind risks arising from a rapidly declining crude oil price in 2015,” said Emeka Ucheaga, CEO at EUA Intelligence, an investment advisory firm based in Lagos.
Stock return in 2015 was -17.36 percent.
In 2016, stocks also declined by 6.17 percent as Nigeria fell into its first recession in 25 years due largely to a 5-month delay in approving the 2016 budget which impeded the government’s ability to quickly respond to the collapsing oil price and volatile Naira hurting the economy in 2016.
In 2017, stocks posted their first positive return under President Buhari as an economic rebound from recession boosted stock returns to 42.3 percent, helping Nigeria become the 3rd best stock market in the world in 2017. The delight was short-lived however, as stocks fell in the two consecutive years following 2017 even as the economy continued to grow in 2018 and 2019 albeit at a slow pace. Stocks fell -17.81 percent in 2018 and -14.6 percent in 2019 bringing the average annual stock return to -2.73 percent between 2015 and 2019 under President Buhari.
An unlikely stocks rebound which began in April 2020 was more than enough to make 2020 Nigeria’s best market run in 13 years even after the oil price crash in the first quarter of the year had sent stocks crashing in the first four months of the year.
“The economy fell into its 2nd recession under Buhari but the historical drop in Treasury bill yields to 1 percent rate region significantly reduced the discount rate in Nigeria’s stock market and sent stocks firing higher which pushed stock returns to 50.03 percent in the unlikeliest of years. A year marred by economic recession, record fiscal deficit and a ravaging global health pandemic,” said Ucheaga.
In the first 6 years under President Buhari, Nigerian stocks recorded 4 years of decline (2015, 2016, 2018, 2019) and 2 positive years (2017, 2020). President Jonathan recorded 3 years of decline and 3 positive years while President Obasanjo recorded 1 year of decline (1999) and 5 consecutive years of outstanding stock returns (2000, 2001, 2002, 2003, 2004 – average annual stock returns in these years was 36.84 percent).