Nigeria’s Equities Market Outperforms Rising Inflation, Gains 39.8% In Q1

Despite double-digit inflation, rising insecurity and other macroeconomic challenges, Nigeria’s equities investors reaped a whopping N18.2 trillion in the first quarter(Q1) of 2024, gaining above the inflation rate of 31.7 per cent.
The overall Nigerian Exchange (NGX) market performance measure All-Share Index (ASI), which tracks the general market movement of all listed equities on the Exchange, rose by 39.84 per cent to close at 104,562.06 points in the first three months of the year from 74,773.77 points it closed on December 29, 2023.

Also, the market capitalisation gained N18.203 trillion to close on March 28, 2024 at N59.121 trillion from N40.918 trillion at which it opened for trading activities on January 2, 2024.
The N18.2 trillion gain in market capitalisation, is coming on the backdrop of rising insecurity, double-digit inflation, other macroeconomic challenges, and global uncertainty.
Since the beginning 2024, the stock market has witnessed an unprecedented rally and buying interest, especially in the financial services, consumer, and industrial goods sub-sector, which has continued to trigger massive bargain hunting in large company shares. This has pushed the key performance indices and stimulated activities in the market, a development that has led to the rating of the stock market as the best-performing in the world.

The monthly breakdown of market capitalisation revealed that the equities market in January 2024 gained N14.44 trillion in market capitalisation, while in February, the equities market of the dropped by N650.5 billion in February 2024 amid corporate earnings by listed companies, as investors divested into the Treasury Bills (T-bills) market.
In addition, the market capitalisation in March added N4.41 trillion amid mixed corporate earnings by listed companies.
Capital market analysts stated that the stock market performance in Q1, 2024 is on the backdrop of mixed corporate earnings by listed companies, federal government’s reforms in the foreign exchange market and fuel subsidy removal.

Responding to market performance in Q1, 2024, the vice president, Highcap Securities Limited, David Adnori stated that investors are trading based on sentiment.
He stated that the emergence of President Bola Tinubu further energised the stock market since market participants have hope in his ability to rejig the economy and implement economy-friendly policies.

Adnori, however, was optimistic that the stock may maintain its positive momentum in the second quarter of 2024, on the backdrop of banking sector recapitalisation and expected 22023 corporate earnings by most especially the banks and first quarter result and accounts for March 31, 2024.

Amid the hike in the Monetary Policy Rate to 24.75 per cent, capital market experts stated that its impact has created sentiment trading among investors who see the fixed-income market as an alternative investment opportunity to hedge against double-digit inflation.

The CEO, Wyoming Capital and Partners, Tajudeen Olayinka, said the equities market is now in a repricing mode because of interest rate hike and continued issuances of one-year Treasury bills at high effective yield of over 20 per cent.

“So, we may be witnessing a shift to the fixed income market in the second quarter of 2024,” he added.

Also, the chief operating officer of InvestData Consulting Limited, Ambrose Omordion said, “the stock market action continues to range, remaining in its distribution phase and a bottom reversal chart pattern that signals recovery and uptrend. Although, we see the government and its economic team trying to return the nation’s economy to the path of recovery, even with the continued mismatch of policies and implementation style that reflects a disconnection between the fiscal and monetary perspectives.”

On market outlook, Omordion said: “We expect a mixed sentiment and position taking to continue as players digest the TB rates outcome and corporate earnings inflow with dividend announcements, while taking advantage of low valuation to position and rebalancing portfolio.

“This is amid the volatility and pullbacks that add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”

Afrinvest Limited pointed out that, “we anticipate that the positive sentiment would linger in April spurred by increased corporate activities following banks recapitalisation announcement and growing Foreign Portfolio Investment (FPI) traction into equities.”