• Transactions rise by 54%
Total turnover at the Nigerian equities market rode on the back of intense bargain-hunting to its highest in a decade.
The market performance was driven largely by increased transactions by institutional and individual Nigerian investors amid optimism that ongoing economic reforms would lead to improved returns.
Official report by the Nigerian Exchange (NGX) at the weekend indicated that total transactions at the equities market rose by 53.94 per cent to N3.578 trillion by the year ended December 31, 2023 as against N2.324 trillion recorded the previous year.
The previous highest turnover was in 2014 when the market recorded transactions worth N2.676 trillion. The lowest turnover was in 2016 with total transactions of N1.511 trillion. It had dropped from N2.168 trillion in 2020 to N1.899 trillion in 2021.
Transactions over the years included N1.928 trillion in 2019, N2.404 trillion in 2018, N2.543 trillion in 2017, N1.906 trillion in 2015 and N2.051 trillion in 2013.
The record surge in transactions’ value further underscored that the record-breaking price appreciation at the Nigerian market was underpinned by strong demand.
Nigerian equities market operates a volume-driven pricing system under which a stipulated number of shares is required to effect a price change. As such, share price movement is directly correlated to the forces of demand and supply.
The stock market had closed 2023 as one of the three best-performing markets globally. Average return for Nigerian equities in 2023 stood at 45.90 per cent, equivalent to net capital gains of N12.81 trillion.
The average return made Nigerian equities best inflation-hedging asset class in the country. The market had during the year surpassed a historical record of N40 trillion market capitalisation.
With four consecutive years of positive return, the stock market has shown resilience amidst macroeconomic economic challenges of foreign exchange (forex) scarcity, naira depreciation and spiralling inflation.
The market had broken its well-known previous cycle of decline in pre-election year to record its third consecutive positive performance in 2022, with full-year average return of 19.98 per cent, equivalent to net capital gain of N4.455 trillion. It had closed 2021 with average return of 6.07 per cent, equivalent to net capital gains of N1.278 trillion. In the throes of the outbreak of COVID-19 pandemic in 2020, it had recorded average return of 50.03 per cent, representing net capital gains of N6.483 trillion.
ASI closed 2023 at 74,773.77 points as against its opening index of 51,251.06 points for the year. It had opened 2022 at 42,716.44 points.
Aggregate market value of all quoted equities had also risen from 2023’s opening value of N27.915 trillion to close the year at N40.918 trillion. It had recorded N22.297 trillion as opening value for 2022.
The overall performance of the equities market has largely been influenced by what the market described as “post-inauguration rally”, referencing the positive sentiments that have trailed the pro-market reforms of the Tinubu’s administration, since May 2023.
The NGX had stated that experts’ opinions on the strong performance of the market were that the bullish trend was due to “a combination of factors, including investor sentiment influenced by macroeconomic developments such as the formation and swearing-in of the economic cabinet by President Bola Tinubu”.
The NGX had also attributed the market performance to the “audacious macroeconomic reforms under the new administration” of Tinubu.
According to the NGX, market operators were of the view that “the policies of the new administration under President Bola Tinubu” had “led to the rise in the fortunes of investors”.
Afrinvest Securities had said “economy reform optimism” bolstered the market performance, noting that the “the rally in the market followed the promise of critical reforms by the President Bola Tinubu administration”.
Chief Executive Officer, Crane Securities Limited, Mike Ezeh said the emergence of Tinubu had further energised the market as market participants have hopes in his ability to rejig the economy and implement economy-friendly policies.
He urged the new government to continue to implement policies that would provide enabling environment for businesses to thrive, noting that this would help boost foreign direct investments (FDIs) and attract issuers to the capital market.
The equities market last week crossed a new milestone of 100,000 index mark, a new record and major reference point.
The ASI built on the midweek 100,000 index point to close weekend at 102,401.88 points. Aggregate market value of all quoted equities at the NGX also rose simultaneously to close weekend at N56.038 trillion.
Analysts were unanimous that the 100,000 index mark was a milestone for the Nigerian market.
Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said it was a historic moment for the market.
“It’s really historic given that we’ve not been here before. What’s even more remarkable is that the market is still standing very stable and firm despite the bullishness that have taken us to this point,” Amolegbe, former president of Chartered Institute of Stockbrokers (CIS), said, referring to a bullish run that had seen Nigerian equities as one of the three best-performing global stock markets.
Managing Director, Highcap Securities, Mr. David Adonri, said the new index mark called for celebration as well as caution, urging stakeholders to seize the moment to improve the economy.
“This rally will only be useful at end of the day if it translates into capital formation for the productive economy. With this rally, a conducive environment has emerged for capitalization of strategic sectors of the productive economy. Before it fizzles out, let issuers seize the opportunity,” Adonri said.
Afrinvest Securities described the index mark as “a new record milestone”, expressing optimism that the market will sustain “extended positive performance”.
Cordros Securities said the index point was “the highest point on record”, attributing the rally to continuing bargain-hunting by investors.
CardinalStone described the 100,000 index as a “psychological mark” and a “new high”, spurred primarily by bullish sentiments in cement and food heavyweights.
