Stock Market Depreciates by N857bn in March Amid Political Tension

Kayode Tokede

The market capitalisation of the Nigerian Exchange (NGX) depreciated by N857billion in March 2023 amid political tension, inflationary pressure and scarcity of local currency in the domestic economy.

Nigerians on February 25 and March 18, 2023 went to the polls to decide the leadership of their country, leading to foreign investors exit in some fundamental stocks on the Exchange.

Also, inflation rate, according to National Bureau of Statistics (NBS) increased to 21.91 per cent in February 2023 from 21.82 per cent reported in January and it impacted on investors return on investment in the stock market  

Although the stock market in first quarter gained N2.44 trillion in market capitalisation to close on March 31, 2023 at N29.544 trillion from N27.915 trillion at which it opened for trading activities on January 3, 2023, its performance in March dropped by N857billion from N30.401trillion to N29.544trillion it closed for trading.

The overall market performance measure NGX All-Share Index, which tracks the general market movement of all listed equities on the Exchange, rose by 5.11 per cent to close at 54,232.34 basis points in Q1 2023 from 51,595.66 basis points it closed on December 30, 2022.

NGX ASI in the month of March dropped by 2.82 per cent to 54,232.34 basis points from 55,806.26basis points.

The decline was influenced by    investors profit-taking in Airtel Africa Plc, MTN Nigeria Communications Plc, and Dangote Cement Plc.

The stock price of Airtel Africa dropped to N1,479.00 per share, a decline of 8.7 per cent from N1,620.00 per share it opened for trading in March while Dangote Cement show its stock price closing March at N270 per share, representing a decline of 2.9 per cent from N278 per share it opened for trading.

The stock price of MTN Nigeria Communication moved to N240.00 per share in March from N245.00 per share it closed in February 2023, representing a decline of 2.04 per cent.

Amid controversies, the stock price of Seplat Petroleum dropped by 13.2 per cent to  N1,150.00per share in March from N1,325.00            it closed for trading in February 2023.

However, the sector performance in Q1 2023 was bullish as most indices closed the period on uptrend as at March 31, 2023. NGX Consumer Goods index appreciated the most by 19.32 per cent. NGX Premium Board index followed with a gain of 11.97 per cent, while NGX Oil & Gas index rose by 10.45 per cent.

Others are NGX Lotus II index, NGX Banking index, NGX Pension index, NGX 30, NGX Industrial Goods index and NGX Insurance went up by 8.79 per cent, 8.50 per cent, 6.35 per cent, 4.93 per cent, 2.21 per cent and 1.81 per cent in that order.

Financial analysts noted that the positive sentiment during the period was as a result of change in the holding structure of the market since foreign investors left the market on the grounds of COVID-19 and local investors dominated with increased buying interest due to the better-than-expected corporate earnings post-COVID and higher dividend payouts.

Commenting, Managing Director of HighCap Securities Limited, Mr. David Adonri said the

equities market will survive current political uncertainties because investors are futuristic that the prospect for yield environment is bright saying, “we are in the earning season, when the market normally sustains positive sentiment, but this season is within the period of an election. I think the crave for dividend is overshadowing what would have been the impact of the elections.”

Also, in a recent report from Cordros Securities Limited said, “we expect investors positioning for 2022 full year results ahead of upbeat corporate earnings and re-investment of dividends to drive bullish sentiments in Q1, 2023.

“Nevertheless, in the latter part of the year, we believe that market sentiments will be shaped by a combination of the outcome of the 2023 elections; market-friendly policy or reforms; the direction of monetary policy and impact on fixed income yields; sector-specific events; and the weak macroeconomic environment.”

The investment firm added that, “we believe there is scope for slight expansion in valuation multiples in H1, 2023 as long as corporate earnings remain resilient. Thus, investors will likely continue to seek relative safety in value stocks as they remain concerned about the market’s volatility, political and economic uncertainties, and higher interest rates.”

Meanwhile, analysts have advised investors to trade with caution as the uncertainties continued to rock the 2023 elections, maintaining their positive outlook on dividend yields and capital appreciation in bellwether stocks.

Speaking on the outlook of the stock market in 2023, the Managing Director/Chief Economist at Analysts Data Service and Resources Limited,  Dr Afolabi Olowookere, had disclosed that while recent evidence suggests the market performance during pre and post elections comes out negative, it is expected that the stock market might close in the negative territory at the end of the year.

According to him, “The past may not necessarily be the one we might see in future. In the last three years of election, the market had closed in the negative and so looking at it, stock market returns might likely close at -16 per cent at the end of the year and this will be centered on factors like uncertainties around the outcome of the elections, low capital inflows and rising inflation.”