Investors in the Nigerian equities market gained N5.62 trillion Naira with market capitalisation hitting N27.92 trillion on the last trading day of the year, December 30, 2022. This is a 25.3 percent increase compared with N22.30 trillion the market opened on January 4, 2022. The NGX All-Share Index (ASI) also rose to 51,251.06 basis points (bsp) against 42,716.44 bsp in January.
Notwithstanding that the market closed higher this year, the nation’s elevated inflationary environment has eroded the real gains to investors who should be laughing all the way to the bank for the handsome returns on their investment. This is compounded by a struggling economy that has multiplied misery across the strata of the society.
Inflation rate quickened for the 10th straight month to a new 17-year high of 21.47 percent in November 2022 – driven majorly by food and petrol/diesel inflation. This has pushed the cost of goods and services beyond the reach of the ordinary citizen with a lean income as Nigeria maintains the infamous title of ‘World Poverty Capital’ since 2016.
The consistent rise in inflation rate has left many Nigerians poorer and also constrained business growth, with investors losing huge sum of money as Naira depreciation becomes a worst victim of the high cost of doing business. This has made investors high level losers in equities market that appears immune from the slide in the economy, especially since 2022.
The Nigerian Exchange (NGX) hit the peak of its growth on Friday, May 27, 2022 when it recorded a market capitalisation of N29.15 trillion and an All-Share Index (ASI) of 54,085.30. It was a historic performance being the highest since the birth of the establishment in 1961.
It was also the peak of a bullish trend that began in 2020 when Nigeria emerged the best performing stock exchange in the world amid COVID-19 pandemic which spread human suffering and destabilised the global economy in the worst dimension in 100 years.
“Inflation discourages investment and savings. You can see that the market looks good this year even in the midst of a poor economic outlook. But N10,000 of yesterday is far less in value today than when the investment was made. The money is big, but the value is small,” said Mike Abbah, an investment analyst.
A curious angle to this development is that the Nigerian equity market achieved the feat amid a downturn that saw the economy hemorrhaging from severe headwinds. One of the reasons for the strong performance is that the NGX is backed by stocks of strong firms which reflect the backbone of the economy, such as Dangote Cement, MTN Nigeria, Airtel Africa, Nestle Nigeria, among the others.
Dr. Paul Uzum, a Stockbroker and Head of Securities Trading at Planet Capital, attributes the bullish trend in the equities market to major listings and the attitude of bargain hunters, including institutional investors.
Uzum explained that the market got two major listings during the year: Buafood and Geregu Power. The two companies added N1.5 trillion to the NGX market cap for the year as domestic investors take position amid rapid exit of foreign investors.
There was also a selective stock rally in Airtel Africa which gained over 50 percent in share price during the year and added N2 trillion to the NGX market capitalisation.
“Despite the rough financial year for the general economy, many listed companies turned out fantastic results. First was the Agric sector with strong numbers from Okomu and Presco.
“The Banks did very well too. Consumer Goods struggled but were still better than last year with improved earnings seen in the breweries sector, notably Nigerian Breweries and Guinness. PZ, Cadbury Nestle, Buafoods and Flourmills showed strong numbers,” Uzum explained.
Further analysis showed that Industrial Goods struggled to catch up with the performance of 2021, though not really impressive as seen in Dangote, Wapco and Bua Cement.
Oil and Gas recorded mixed fortunes with the downstream doing well, as seen in Seplat which took advantage of the rise in price of crude and the market rewarding the stock with a 69 percent leap in price during the year.
Uzum said, “The downstream sector barely replicated their 2021 numbers. Insurance sector recorded impressive performance as seen in some select companies like Mansard, NEM, Custodian, but the market remained adverse to the sector. In all, it was a good year especially when compared to what happened in the markets of the developed nations in North America and Europe.”
A Stockbroker and the Doyen of the Stockbrokers, Mr Sam Ndata, said the political season is creating opportunities for people to make money and invest in the equities market.
“This is election period and people are getting money from the politicians to do one assignment or the other. Part of this money will enter the pocket of wise investors who will bring it to the capital market to earn returns by way of dividend, capital appreciation and bonuses,” Ndata, who is a Chief Dealer/COO at Hedge Securities and Investment Co. Ltd, told THEWILL in a note.
The National Coordinator of Independent Shareholders Association of Nigeria, Prince Dr Anthony O Omojola, said the gain in the equities market today goes a long way to compensate for the unintended losses in the year.
He added that it is also a signal that the market will be more stimulated in the new year as evidence that the market support the passing of 2023 federal budget and the supplementary budget presented by President Muhammadu Buhari.
At the end of the last weekday of trading on the Nigerian Stock Exchange (NGX) last Friday, a total of 890,682,055 shares in 3,566 deals, corresponding to a market value of NGN 7,355,665,086.39, were traded. Compared with the previous NGX trading day (Thursday, December 29), last Friday’s data shows 199 percent improvement in volume, 35 percent improvement in turnover, but 20 percent decline in deals.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
