In the midst of growing macroeconomic issues such as inflation and insecurity, as well as uncertainties surrounding global economies, the Nigerian stock market saw a gain of N8.4 trillion in just nine months.
Since the year’s beginning, the equities market has seen an unparalleled surge in buying interest across all sectors, with the financial services, consumer, and industrial goods subsectors seeing the most of it. This has resulted in widespread bargain hunting in large company shares, driving up the key performance indices and igniting market activity.
To be more precise, on September 29, 2023, the market capitalization closed at N36.331 trillion, having increased by N8.416 trillion from N27.915 trillion at the start of the year.
Parallel to this, on September 29, 2023, the Nigerian Exchange (NGX) Limited All-Share Index (ASI) increased by 29.52 percent, from 51,251.06 points on December 30 to 66,382.06 points.
Foreign portfolio investors have begun to grow their market share, according to recently released reports from the NGX on domestic and foreign portfolio participation in equity trading for September 2023.
Remember that during the first half (H1) of 2023, market capitalization increased by N5 trillion, pushing the NGX to close at 60, 108.86 on Tuesday, June 27, 2023—a 16-year high for the first time since 2008. On January 3, it was 51,251.06, which indicated a rise of 8,857.8 points, or 15%, for the start of the year.
Comparably, the market capitalization of listed stocks, which began the year at N27,915 trillion, ended the first half at N32,729 trillion, indicating an increase of N5 trillion, or 15%, in value.
Experts asserted that investors’ confidence in the market has been restored by the new government’s ostensibly audacious economic changes and potent national economic team.
The market’s extraordinary upswing since the year’s beginning has also allowed businesses to demonstrate notable expansion in a number of financial indicators, including profit before taxes, total assets, and net profit margin, along with enticing interim dividends—particularly for the top banks.
For example, N15.698 billion and N14.72 billion, respectively, were the interim dividends declared by Zenith Bank and Guaranty Trust Holding Company (GTCO) of 50 kobo each. This is an increase from the N9.42 billion and N8.83 billion interim dividends paid during the same time in 2022.
A 50 kobo interim dividend was also paid by United Bank for Africa (UBA), which is more than the 20 kobo declared for the same period in 2022. Comparably, a review of the half-year results of a few listed companies revealed that Zenith Bank’s profit jumped to N291 billion from N111 billion during the same time in 2022, while UBA’s profit after taxes increased from N70 billion in the half-year 2022 to N378 billion in 2023. GTCO had a N280 billion increase in half-year earnings from N77 billion. During that time, the profits of Access Bank and FBN Holdings increased as well, from N95 billion and N56 billion to N135 billion and N187 billion, respectively.
Additionally, an analysis of the price movement performance of listed firms for the year thus far revealed that equities in all industries have seen strong capital growth, giving investors a double return.
For example, MTN Nigeria has gained 29.30 percent so far this year, while Dangote Cement has increased by 24.9%. BUA Foods saw a 100% gain in capital appreciation, whereas Conoil saw a 199% increase.
The Transnational Corporation of Nigeria made 173% profit, and Cadbury and PZ Cussons Nigeria made 50% and 49% profit, respectively.
The experts thought that listed enterprises’ financial performance would be impacted by the incoming government’s strategic choices and policies in every industry.
According to Proshare analysts: “The key drivers of the growth of the domestic Nigerian bourse have been the steady growth of the domestic money supply, which has lubricated economic spending post-COVID-19. The money supply tap has not turned off or back since the heart of the COVID-19 era; the monetary authority continued to accommodate fiscal spending overruns through the Central Bank of Nigeria’s Ways and Means (W&M) window up until 2023 when it securitized the outstanding N22.7 trillion by converting it into a long-dated (40 years) bond at a coupon rate of nine percent per annum.”
“High extra-budgetary expenditure and rising interest rates combined to attract investors to federal bonds and bills but also saw investors take advantage of the usual growth in banking sector earnings when interest rates rise. Banks listed on the NGX have seen major price increases in the last twelve months.”
They went on to say that the broad NGX year-to-date return has demonstrated market resilience against relentless inflation, which explains the persistence of investor interest in the equity market.
Ambrose Omordion, the chief research officer of InvestData Consulting Limited, advised the new government to strongly pursue transformation reforms and policies in order to sustain performance when speaking about the market prognosis for Q4.
“We expect mixed sentiment on bargain hunting and portfolio repositioning ahead of Q4 in the face of sector rotation. All eyes are on the monetary policy drive of the New Central Bank of Nigeria (CBN) Governor and his team.”
“However, pullbacks are creating ‘buy’ opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer better investment direction to investors.”
“We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.”
