The Nigerian All Share Index dropped by 1.63 per cent to close trading at 49,024.16 points on September 30, 2022, first time since 2019.
The equities market has also sustained a bearish profile for four consecutive months since June this year.
The build-up to the 2023 election has kept foreign investors at bay and sell-offs by domestic investors deepen.
Also, the decision of the Central Bank of Nigeria (CBN) to increase the interest rate to 15.5 per cent has also further depressed investors’ appetite for equities to embrace money market instruments.
The ASI rose to as high as 54.085.30 on May 27 2022 but has since in the past four months dropped by 5,061 basis points or 9.55 per cent
Nigerian Exchange, which opened the month at N26.880 trillion in market capitalization and 49.836.51 in the index at the beginning of trading on September 1, 2022, closed on September 30, 2022, at N26.451 trillion and 49,024.16 index points, hence has earned a month to date loss of about N429 billion or 1.63 per cent
Further analysis showed that the NGX Insurance Index got the hardest hit in terms of decline in percentage in September, dropping by 6.45 percent to 168.60 points from 180.23 points it opened for trading during the month.
The Oil & Gas Index followed with a decline of 4.48 percent to 508.26 points from 532.15 points it opened for trading in September.
Pre-election years are usually characterized by negative sentiments, which also result in the exit of foreign investors.
The build-up to the 2023 general election has started impacting the market negatively. Frightened foreign and domestic investors are exiting the market, which is sparking up a liquidity crisis.
Market experts believe that domestic Investors’ sentiment is usually weak as they seek to reduce their market exposure when elections draw closer. The intensity of the impact is usually a function of the degree of political tension and uncertainty generated by political activities.
The Central Bank during its last MPC meeting had increased the interest rate from 11.5 per cent to 14 per cent in the last two meetings, however with the inflation rate still spiking above 20 per cent, the CBN has raised the rate further to 15.5 per cent in a bid to combat the rising cost of goods and services.
According to market operators, when the interest rate is low, speculators move their funds from money market instruments to the stock market for higher yield, just as they move from stocks to other asset classes, especially money market instruments when the interest rate is high.
Analysts at CardinalStone Partners Limited noted that the build-up to the 2023 election will keep foreign investors at bay and throw up more financial account-related concerns.The analysts, while commenting on the state of the nation in their 2022 mid-year outlook themed: ‘Same Challenges, New Shocks’ argued that pre-election year concerns and fears of negative pass-through to inflation will likely limit the magnitude of currency adjustment made at the official market in the current year. According to them, akin to the trend witnessed in emerging and frontier markets, Nigeria was also mostly unappealing to foreign capital providers in H1’22. They attributed the sentiment to geopolitical uncertainties and hawkish rendition from global central banks. In addition to these global factors, they pointed out that lack of market reflective FX rates, illiquidity, and a backlog of uncleared foreign exchange demand dampened investors’ sentiments.
Mr. David Adonri, Executive Vice Chairman, Hicap Securities Limited said, “Right from the penultimate year to the election, the socio-political atmosphere becomes charged. Politicians resort to violent rhetoric and divisive tactics, which deepen the country’s socio-political fault lines, in order to establish a competitive edge. During this period, the economy becomes overloaded with money arising from excessive election spending, which spikes inflation.
“Historical antecedents indicate that on average, both equities and bonds show positive or negative performance in the penultimate year and immediately after the election. While the drama of general elections can make your imagination run wild, what you need to watch out for is how the unfolding scenario will affect the economy, the capital market, and your portfolio.
“It may be helpful to stick to a long-term strategy, which is longer than any election cycle, as returns in the capital market are made over a full business cycle, which may be longer than even one presidential term. For investors with a low-risk tolerance, the safety of bonds can douse their apprehensions.”
Adonri said when interest rate rises, investors tend to migrate to fixed-income securities.
“The hike is capable of migrating financial assets away from equities to fixed income; expect investors to sell down their shares in the near term. Both equities and fixed income operate on yield, with the increase in the interest rate the yield in fixed income will be higher and investors will move there until the price of equities fall to be competitive in the debt market. If macroeconomics improves and inflation starts dropping it will then favour the equity market and we will start seeing stabilization.”
Mr. Victor Chiazor, Head of Research and Investment, FSL Securities Limited said with the increase in interest rate, it is expected that all the stocks will definitely be hit hard.
“Investors just need to be patient, some banks like GTB and Zenith will definitely bounce back but that will be when the market recovers, when the inflation ease and hawkish stands by CBN reversed, then we will start seeing reversal from the fixed income securities. There is no need for investors to offload their shares if they have patience and capital. Once the economy recovers, the market will be revived, the best idea is to put the idle fund to the equity market and be patient for a bumper yield.”
IATF2023 records $43.8bn closed deals
The African Export-Import Bank has disclosed that the third Intra-African Trade Fair (IATF2023) held in Cairo from 9 to 15 November witnessed the conclusion of business deals and transactions valued at US$43.8 billion.
In the final tallies released in Cairo, the organisers of the continental event said that the amount represented the value of 426 deals concluded in 21 sectors covering 52 countries. At a press conference to announce the results, Executive Vice President (Intra-African Trade Bank) at Afreximbank, Mrs Kanayo Awani, also announced that 130 countries participated in the trade fair, which attracted 1,939 exhibitors and 28,282 participants who attended physically and through the IATF virtual platform.
One of the notable transactions included the Export Agriculture for Food Security Framework executed by several African countries (as Origin Countries) and ARISE Integrated Industrial Platforms, Arise IIP (as Anchor Investor) to which Afreximbank committed US$2 billion to boost production, processing, and intra-African trade in agricultural products and to provide African farmers and agribusinesses with opportunities to access larger markets across the continent.
Mrs Awani also said that the IATF had successfully established itself as the premier trade and investment event in Africa, with the unique capacity to increase intra-African trade and investment, especially in the context of implementing the African Continental Free Trade Area (AfCFTA) Agreement.
“Building on the successes of IATF2018 and IATF2021, I am proud to say that the buzz and energy generated by IATF2023 will be felt across Africa and beyond for many years to come. Together, we have explored new possibilities and opened new doors for a brighter future for our continent,” she added.
IATF2023 kicked off on 9 November and included an official opening ceremony, a Presidential Summit which was addressed by President Abdel Fattah Al Sisi of the Arab Republic of Egypt, a Trade and Investment Forum, the Creative Africa Nexus (CANEX), an African Auto Forum, AU Youth Entrepreneurship Programme, a Sub-Sovereigns Conference, a Diaspora Summit, an African Industrialization Week and an African Tourism Sustainability and Investment Forum. A series of side events were also held as part of the trade fair.
The next edition of the IATF will be hosted in 2025 by Algeria.
Investors record positive gains, as NGXASI advance by 0.43%
Investors yesterday recorded positive gains on the Nigerian equities market following Monday’s losses.
According to data obtained from the Nigerian Exchange Limited (NGX) website, the NGX Market CAP recorded a gain of N165.99 billion in Naira terms.
The NGX All-Share Index (NGXASI) also advanced by 0.43 percent, closing at 71,250.17 basis points, compared to the previous day’s loss of 0.66 percent, which closed at 70,946.83 basis points. With the growth, the NGXASI now stands at 39.02 percent.
The total volume traded also advanced by 20.93 percent to close at N433.57 million, valued at N11.11 billion and traded in 7,016 deals.
The Gate Index closed flat at 183.36, while the Toni index advanced by 0.27 percent to close at 375.28 basis points.
At the close of trading, the market recorded 40 gainers, 15 losers, and 64 unchanged. NSLTECH topped the gainers list, while ABBEYBDS topped the list of losers.
UACN was the most traded stock by volume with N61.71 million, while NIDF was the most traded stock by value with N2.22 billion units traded.
UACN also had the highest volume contribution with 14.23 percent, while UBA and GTCO followed closely.
According to the value chart, NIDF is at the top with a 20.0 percent contribution. AIRTELAFRI and MTNN followed closely behind.
SEC DG calls for multifaceted approach to enhance capital market growth
The Director-General, Securities and Exchange Commission (SEC), Mr. Lamido Yuguda has called for a multi-faceted approach to enhance the growth of Nigeria’s capital market.
The SEC DG made this known while addressing journalists at the 2023 conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) held in Lagos at the weekend.
According to Yuguda who was represented by the Executive Commissioner Operations, SEC, Mr Dayo Obisan, “Effectively harnessing the capital market for national development entails a multi-faceted approach, these include deploying more infrastructure, fostering more public-private partnerships, establishing specialised entities like special purpose vehicles (SPVs), listing state-owned enterprises, issuing green bonds to support sustainable projects, and bolstering small and medium enterprises among others.”
According to him, the revised capital market master plan underscored SEC’s commitment to deepening and. repositioning the financial market as a key driver of sustainable economic growth.
“The master plan which represents collective aspirations of the capital market community is focused on driving initiatives geared towards growing and deepening the market with the ultimate goal of accelerating the emergence of our dear country in the top 20 economies by the year 2025,” Yuguda said.
The SEC DG added that synergy holds the potential of unleashing capital market prowess and paving the way for a prosperous future.
According to him, achieving the objective necessitates an increased utilisation of market mechanisms and instruments to raise funds and stimulate economic advancement.
He pointed out that the commission would continue to introduce new ideas and policies that would support the development and regulation of a capital market that is dynamic, fair, transparent, and efficient to contribute to the nation’s economic development, noting that investors protection plays a crucial role in the development and integrity of the capital market.
Also speaking at the event, the Deputy Director, SEC Lagos Zonal office, Mr John Briggs, urged the government to create infrastructure financing instruments that would facilitate easy servicing of obligations.
“We have encouraged a lot of infrastructure funds like sukuk, and green bonds and we are even talking about blue bonds to develop the market.”
“The capital market has created the conducive environment to ensure a transparent and dynamic market which would continue to attract investment,” he said.
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