Foreigners Reinvesting in Nigerian Bourse Lift Market Cap to $38bn

Nigerian equities continued its bullish run on Tuesday, hitting a five-year high. The last time stocks rallied by this much was April 1, 2015.  The All Share Index jumped 4.92% to close at 28,909. 37, lifting the overall bourse to a market capitalization of N15.110 trillion (about $38bn).

A team leader at Cardinal Stone Research, Philip Anegbe, attributes this ongoing rally to Nigeria’s Monetary Policy Committee decision to cut rates last month, and very low yield in the fixed income market.

“NSE (Nigeria Stock Exchange) benefitted from the increased participation of PFAs (Pension Fund Administrators) and other domestic investors that trailed MPC’s decision to cut its policy rate and re-affirm its dovish stance.

“Sustained moderation in fixed-income yields and a lack of sufficient viable investment options have forced investors to re-examine the case for equities,” he said.

Policy analyst and CEO of Cowry Asset Management, Johnson Chukwu, said the decision by Fitch Ratings, an international ratings agency, to revise Nigeria’s outlook from negative to stable has restored foreign investor confidence in the Nigerian bourse and encouraged them to reinvest in the equities market.

Chukwu said another factor driving the market was a positive outlook report on a number of listed commercial banks.

Meanwhile, the biggest contributors to today’s advance was market giant and bellwether stock, Dangote Cement Plc, which jumped to 9.86% to close at N158.2 per share, MTN Nigerian Communications Plc stocks rose 5.7%, and Zenith Bank Plc,  gained 9.5% to close at N20.

In the long run, Anegbe believes this two-week rally might not continue due to profit taking.

“While this pattern is likely to subsist in the near-term, intermittent profit-taking and renewed sell-offs by foreigners, upon improvement in forex liquidity, are risks that can place a cap on the future upside.”

Lillian Jijingi

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