Bamidele Famoofo

Banking stocks, driven by Tier-One banks, offered the best returns to investors in the equities market in Nigeria in 2017. The banking sector of the Nigerian Stock Exchange, which was rated second best bourse in Africa and 11th best in the world, gave equity investors a 73.3 per cent return on investment in one year.

“Given the resilience demonstrated by the banks amidst tougher operating conditions, the banking index was unsurprisingly the best performing sector in 2017, up 73.3%. Performance of the banks remained driven by resilient earnings, supported by interest income (due to higher interest rate environment),” a report on the performance of the market released by Afrivest Research last week disclosed.

On aggregate, the NSE All Share Index delivered 42.3 per cent annual return to share investors (local and foreign) in the review financial year ended 2017.

“It was a significant bounce back following a three year losing streak,” analysts with Afrinvest Research disclosed.

The overall performance of the Nigerian stock market has been attributed to renewed interest by domestic and foreign investors following stability in macroeconomic fundamentals recorded by Africa’s biggest economy in 2017.

Analysts with Afrinvest revealed that the resilient performance from the banks, especially top Tier-One banks in the likes of Guaranty Trust Bank Plc, Zenith Bank Plc, Access Bank Plc, and United Bank for Africa (UBA) Plc, was responsible for the favourable performance of the sector in the review period.

According to Afrinvest, investors showed significant interest in Tier-One banks, which led to Guaranty Trust Bank (GTB) Plc recording 64.9 per cent price appreciation in the period, while Zenith Bank Plc recorded 73.8 per cent price gain. Access Bank Plc increased its share value with a gain of 78 per cent, while United Bank for Africa Plc emerged the most improved stock in terms of price appreciation with 128.9 per cent growth.

Fidelity Bank, a Tier-Two bank, however, joined in the price gainer’s list with 196.4 per cent growth in share price in 2017.

The next most profitable sector for investors in 2017 was Consumer Goods. The sector’s index offered 37 per cent, following distance banking. Analysts have attributed the favourable performance of the sector in 2017 to increase in product prices and improvement in access to foreign exchange, as well as the relative peace in the north-eastern part of the country. Those factors, according to Afrinvest, positively impacted earnings of companies in the index.

The best performing stock in the Consumer Goods sector in 2017 was Dangote Sugar Refinery Plc. The stock, a member of the Dangote Group, boosted investor’s money by 229.8 per cent price appreciation. This was followed by International Breweries Plc, which increased investors’ investment by 192 per cent price gain, as investors cheered the decision of its parent company – AB Inbev – to merge operations of all its subsidiaries in Nigeria.

In the same vein, the Industrial Goods index increased 23.8 per cent on the back of gains in Beta Glass Plc 69.2 per cent price gain, followed by Dangote Cement Plc, the most capitalised stock on the Nigerian bourse, which grew its share price with 32.1 per cent.

The Insurance index grew 10.4 per cent, as Linkage Assurance Plc increased share value by 32 per cent, while Mansard Insurance went up by 20.9 per cent.

The Oil and Gas index gained 5.8 per cent for the year, emerging the least rewarding sector. Seplat Petroleum Plc emerged the best gainer in that index with 56.9 per cent price gain while Oando Plc, despite the challenges faced with regulators in the year, delivered 27.4 per cent gain to investors. The positive performance of the oil and gas industry was mainly due to performance of upstream players, which was bolstered by the cessation of attacks on oil installations in the Niger Delta as well as improved global oil prices. “Sentiment towards the downstream players remained soft during the year, due to absence of reforms needed to revitalise the sector,” Afrinvest Research noted.

The NSE All Share Index had declined 6.2 per cent as at April 20th, 2017 prior to the launch of the I&E FX window. However, following the launch of the window, massive buy interest returned to the domestic equities market to take advantage of cheap valuation of assets. Corporate releases for the rest of the year were reflective of the improving conditions in the broader economy; hence the rally was sustained all year. The NSE ASI gained 42.3 per cent in 2017, the second highest year-on-year index return in 10 years.

“Broad-based rally recorded across sectors as a result of the improved sentiment in the market. A broad-based rally was recorded, which drove all sectors to close in the green for 2017,” analysts said.

In its outlook for 2018, Afrinvest Research has projected that the banking index will again take the lead with 88.2 per cent return. Consumer Goods was tipped to return 37 per cent, like it did in 2017.