At 39.84%, Nigeria’s Stock Market Offers Near Best Investors’ Return in Africa

Kayode Tokede

At 39.84 per cent year-till-date (YtD) gain, the Nigerian stock market, in the first quarter of 2024, offered investors the second best return in Africa on the back of the economic reforms embarked upon by the President Bola Tinubu administration.

The Nigerian stock market, in the period under consideration, according to available data, came ahead of other exchanges, excluding the Zimbabwe Stock Exchange (ZSE) All Share Index, which had about 314.19 per cent YtD growth.

The gain in the NGX All-Share Index (NGX ASI) came, despite rising insecurity, double-digit inflation rate, a recent rise to 24.75 per cent Monetary Policy Rate (MPR) from the earlier 22.75 per cent, among other macroeconomic challenges.

Specifically, the NGX ASI, an indicator used to measure the performance of listed firms on the exchange, opened the year at 74,773.77 basis points, implying an increase of 39.84 per cent, to close March 28, 2024 at 104,562.06 basis points.

In Q1, 2023, the overall market performance measured by NGX ASI rose by 5.11 per cent to close at 54,232.34 basis points.

Since the beginning of 2024, the stock market had witnessed an unprecedented rally and increased buying interest, especially in the industrial goods, financial services, and consumer sub-sectors, which continued to trigger massive bargain hunting in large company shares.

In the period under review, NGX Alternative Securities Market (ASeM) Index gained 135.25 per cent YtD to emerge as the best performing index, followed by NGX Industrial Goods Index, which rose by 78.49 per cent YtD to close Q1, 2024 at 4,28441.20 basis points.

The NGX Banking Index and NGX Insurance Index appreciated by 14.76 per cent and 26.20 per cent YTD, respectively. The NGX   Consumer Goods Index also rose by 43.66 per cent YtD to close March 28, 2024 at 1,610.80 basis points.

These pushed the key performance indices and stimulated activities in the market, a development that led to the rating of the stock market as the second best-performing in Africa, behind the Zimbabwean exchange.

As of the close of trading March 2024, market capitalisation stood at N59.12 trillion, representing an increase of N18.2 trillion or 44.49 per cent from N40.918 trillion it opened for trading this year.

The monthly breakdown of market capitalisation revealed that the stock market in January 2024 gained N14.44 trillion in market capitalisation, while in February, the stock market capitalisation dropped by N650.5 billion, amid corporate earnings by listed companies, as investors divested into the Treasury Bills (T-bills) market.

In addition, the market capitalisation added N4.41 trillion amid mixed corporate earnings by listed companies.

Capital market analysts stated that the stock market performance in Q1, 2024 was against the backdrop of mixed corporate earnings by listed companies, the federal government’s reforms in the foreign exchange market, and fuel subsidy removal.

Responding to market performance in Q1, 2024, Vice President, Highcap Securities Limited, Mr. David Adnori, stated that investors traded based on sentiment.

Adnori stated that the emergence of Tinubu as president further energised the stock market, since market participants had confidence in his ability to rejig the economy and implement economy-friendly policies.

Adnori was also optimistic that the stock market might maintain its positive momentum in the second quarter of 2024, against the backdrop of banking sector recapitalisation and expected 2023 corporate earnings by, especially, the banks, first quarter result and accounts for March 31, 2024.

Amid the hike in MPR to 24.75 per cent, capital market experts stated that its impact had created sentiment trading among investors who saw fixed-income market as alternative investment opportunity to hedge against double-digit inflation.

At the second Monetary Policy Committee (MPC) meeting in 2024, Governor of Central Bank of Nigeria (CBN), Olayemi Cardoso, stated that the committee’s decisions were centred on the current inflationary and exchange rate pressures, projected inflation, and rising inflation expectations.

Cardoso said, “Members were concerned about the persistent rise in the level of inflation and emphasised the committee’s commitment to reverse the trend as the balance of risk leaned towards rising inflation.

“The committee, however, acknowledged the trade-off between the pursuit of output growth and taming inflation, but was convinced that an enduring output expansion is possible only in an environment of low and stable inflation.”

An Investment banker and stockbroker, Mr. Tajudeen Olayinka, stated that the drive by many investors to hedge against inflationary spiral put their buy interests in equity.

Olayinka stated, “And this is demonstrated by simultaneous rise in interest rates and equity prices. Beyond this analogy, economy is still grossly awash with Godwin Emefiele’s N30 trillion illegally printed for the use of former President Muhammadu Buhari’s administration.

“So, there is excess liquidity in the system, chasing fewer profitable investment opportunities in the economy.”