Investors in Nigerian equities rallied net capital gains of about N4.901 trillion in the year 2022, as the market sustained resilience during the year.
The key performance indicator of the Nigerian Exchange (NGX) Limited, the All-Share Index (ASI), went up by 16.9 per cent to close on December 28, 2022 at 49,934.60 points from 42,716.44 points at which it opened trading for the year. Similarly, market capitalisation for the period gained by N4.901 trillion to N27.198 trillion on December 28, 2022 from N22.297 trillion.
Recalled that the domestic stock market the performance of the Nigerian equities market was broadly positive at the start of the year owing to a combination of positive 2021 full year corporate earnings and dividend declarations.
In addition, the accommodative interest rate environment provided room for buying interest amid low yields on fixed-income instruments.
Furthermore, some notable events in the year supported the market rally in H1, 2022, the year started with BUA Foods Plc listed a total of 18.00 billion shares at N40.00 per share on the mainboard of the Exchange. Also, Dangote Cement Plc successfully executed the second tranche of its Share buy-back program in January. Furthermore, the CBN’s approval of Payment Service Bank licenses for the two listed telecommunication players; MTN Nigeria Communications and Airtel Africa spurred a positive market reaction. Among others major events.
Also, Nigerian Exchange (NGX) data shows that total foreign inflows for 2022 full year, as of October closed at N178.21 billion, against total outflows of N171.38 billion, translating to a net inflow of NGN6.83 billion in the period.
Analysts cited the sustained FX liquidity challenges and a lack of flexibility in the FX framework as the main drivers of the low participation of foreign investors amid rising interest rates in advanced economies.
They noted that foreign investors’ share of the total transactions on the NGX fell to a new low of 7.5 per cent in May 2022; the lowest level since the NGX began compiling the current data series.
Analysts at Cordros Securities Limited said, “The equities market’s performance was mixed. A combination of significantly positive earnings with its associated dividend declarations, an accommodative monetary policy stance, and sustained FPI interest in fungible stocks underpinned the stellar H1, 2022 performance on the domestic bourse.”
The research house said, “However, the story turned sour in the year’s second half, as investors rebalanced portfolios following the uptick in fixed income yields and a shortfall in liquidity, given the deliberate actions by the monetary authorities to hike interest rates. It is pertinent to note that the impact of electioneering activities on the equities market was less pronounced than in previous pre-election years.”
The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said, “Despite the lingering high interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks still seeing positive activities from traders and investors. There are equity players should pay attention to, as the correction in the NGX index action creates buying opportunities in some sectors and individual defensive stocks with high dividend high yield and positive earnings growth.”
While appraising the market, the managing director of APT Securities and Funds Limited, Mallam Garba Kurfi, said the market so far closed the year positive.
“Among the factors that contributed to this is that most of the major capitalised stocks, that is, Airtel Africa, MTNN, Dangote Cement and BUA Cement, which control over 70 per cent of the total Market Capitalisation gained about 50 per cent during the period under review and qualified to be Invest by PFAs, which they did,” he said.
The MD of ARM Securities Limited, Mr. Rotimi Olubi, said the improved participation by local investors in the market boosted the performance this year.
He also said that the positive earnings boosted investors’ confidence in the equities market, adding that improved participation by domestic players in the market was the major factor that shielded the NGX from negative sentiments seen in the global equities market due to the Russia-Ukraine conflict.
The CEO, Wyoming Capital & Partners, Mr Tajudeen Olayinka, identified improved liquidity in the system for the positive performance of the Nigerian stock market, adding that the crash in the crypto market brought liquidity back to the equity market.
“It has been said that more Nigerian investors participate actively in the crypto space, and so, the sudden, though long expected crash in that market, made some affected Nigerian investors cut their losses, for less volatile and recoverable opportunities in the equity market,” he said.
Other factors driving liquidity in the equities market he added are instant payment of dividends to shareholders through electronic means (e-dividend), which provides opportunities for immediate reinvestment of these dividends, especially by institutional investors, who manage funds and portfolios for clients.
“This did not leave out other traditional investors, who took advantage of low prices, in the run-up to financial year-end rallies that we saw at the beginning of the year 2022,” he said.
