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At 68.46%, NGX Banking Index Leads Other Major Indices on NGX
Kayode Tokede
Amid the Central Bank of Nigeria (CBN) free float of the naira, the Nigerian Exchange Limited Banking Index (NGX Banking) has appreciated by 68.46 per cent Year-till-Date (Ytd) , outpacing other indices on the bourse.
The NGX Banking as of July 21 has surpassed the NGX All-Share Index that closed at 26.83 per cent YtD growth as the stock market has witnessed 16-year rally.
The stock market had witnessed a similar scenario in 2017 as the banking index gained 73.3 per cent compared to a 42.3 per cent NGX All-Share Index return.
According to THISDAY investigation, the NGX Banking Index that opened trading 2023 at 417.5 basis points and closed July 21 at 703.32 basis points, has benefited from the cancellation of the multiple foreign exchange rates by the CBN.
Other indices, NGX Oil/Gas Index gained 83.55 per cent YtD; NGX Consumer Goods Index added 50.61 per cent and NGX Insurance index appreciated by 49.61 per cent YtD, joining the top four indices gainer on the bourse.
In addition, the NGX Industrial Index increased by 18.76 per cent in its YtD growth.
The past eight years, Nigeria foreign exchange market has witnessed two major realignments of the official Naira/US dollar exchange rate with the parallel market rate. The first happened in mid-2017 when the two rates converged on N360.0/US$1.
The second convergence is happening now although, unlike the first, it is less a case of two rates converging towards a mid-point than a case of the official rate weakening in order to adjust to the parallel rate.
The likes of Unity Bank Plc, Sterling Financial Holdings Company Plc and are the top gainers in the NGX banking index.
The stock price of Unity bank appreciated to N1.65 per share as of July 21, 2023, an increase of 200 per cent from N0.55 per share it opened in 2023, while Sterling Financial Holdings Company increased to N3.96 per share as of July 21, 2023, a growth of 183 per cent from N1.40 per share it closed for trading in 2022.
Further investigation by THISDAY indicated that the surge demand for Access Holdings Plc, Guaranty Trust Holding Company Plc (GTCO), United Bank for Africa Plc, Zenith Bank Plc, among others played critical role in the growth of NGX Banking index.
The stock price of Access Holdings has appreciated to N18.35 per share as of July 21, 2023, an increase of 116 per cent from N8.5 per share it opened for trading in 2023.
GTCO has gained 67.4per cent in stock price to N38.50 per share; UBA added 96.05 per cent YtD to N14.90 per share; Zenith Bank rose by 46.4 per cent YtD to N35.15 and FBN Holdings appreciated by 82.11 per cent YtD to N19.85 per share.
In addition, ETI’s stock price gained 52.4 per cent to N16.15 per share as of July 21, 2023.
Analysts at Coronation Asset Management in a report titled “Investment Opportunities from FX Liberalisation,“ said banking stocks might repeat the 2017 scenario when foreign exchange rates convergence stimulated the performance of banking stocks.
