Despite Global Volatility, Nigeria’s Stock Market Appreciated by N4.15trn in Nine Months

•Investors move to take advantage of high yields in fixed income securities

Kayode Tokede

The stock market of the Nigerian Exchange Limited (NGX) maintained its positive momentum in the first nine months of 2022, gaining N4.15 trillion to outshine global markets that have witnessed severe volatility.

The market capitalisation of the NGX had opened in 2022 at N22.297 trillion, gaining N4.15 trillion or 18.63 per cent to close at N26.451trillion as of September 30, 2022.

Also, the NGX All-Share Index appreciated by 14.8 per cent year-to-date (YtD) to 49,024.16 basis points from 42,716.44 basis points the stock market opened in 2022 for trading.

For the global stock markets, the NASDAQ Composite Index has depreciated by -20.95 per cent YtD, while the United Kingdom FTSE 100 – London Stock Exchange – has depreciated by -6.44 YtD performance.

Other notable stock exchanges which have also recorded decline in performance included: the CSI 300 Shanghai Shenzhen -16.91 per cent in YtD performance and LuxX Luxembourg Stock Exchange Index -25.64 in YtD outcome.

However, in the nine months under review, investors in the Nigerian stock market have witnessed double-digit inflation, scarcity of foreign exchange, uncertainty in global economies, and of course, a hike in the Monetary Policy Rate (MPR) to 15.5 per cent.

Investors in the stock market reacted to Central Bank of Nigeria’s (CBN) hike in MPR, leading to the aggressive movement of investors to the fixed income market that comes with low-risk investment and modest yield.

The stock market between June and September witnessed investors’ aggressive profit-taking amid the apex bank’s policy to tackle the steady increase in the inflation rate.

For instance, the stock market in September depreciated by N429 billion or 1.6 per cent month-on-month to N26.451 trillion, from the N26.88 trillion it opened for trading, while the NGX ASI was down by 1.63 per cent to 49,024.16 basis points from 49,836.51 basis points it opened for trading.

Speaking with THISDAY, the CEO Wyoming Capital and Partners, Tajudeen Olayinka attributed the decline in market performance in September to prolonged repricing of securities across markets and instruments by investors.

According to him, “Investors reacted sharply to three quick successions in MPR hike, beginning with 13 per cent in May, 14 per cent in July, and 15.5 per cent in September. September 2022 was quite spectacular because investors exercised extreme caution by holding back further investment in equity, in reaction to the aggressive rise in inflation (20.52 per cent) in the month of August, 2022.”

Also, the Head, Retail Investment, Chapel Hill Denham, Mr. Ayodeji Ebo, in a chat with THISDAY, stated that the decline was due to the continued rise in fixed income rates due to the persistent hike in MPR.

According to him, “investors prefer to keep funds in dollars due to the persistent exchange rate depreciation.”

On his part, Analyst at PAC Holdings, Mr. Wole Adeyeye said, “Some investors migrated from stock market to fixed-income market in a move to take advantage of high yields, which was triggered by the recent hike in the policy rate.

“Also, foreign investors avoided Nigerian stock market due to the upcoming general elections, weak local currency and insecurity in the country.”

The Vice President, Highcap Securities Limited, Mr, David Adonri said the stock market commenced declining performance when the Monetary Policy Committee (MPC) of CBN increase the interest rate.

He noted that other macro-economic indicators such as inflation rate, and scarcity of foreign exchange have also diminished demand for stocks as investors moved to fixed income markets.

According to him, “The fundamentals of foreign and domestic macro economy indicators in three months have impacted negatively on the stock market.”

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