Nigeria’s Stock Market Defies Elections,  Inflation and Petrol Subsidy Removal, Grows 45.9% YtD in 2023

Following the successful transition this year and some reforms initiated by President Bola Tinubu, investors’ return on the Nigerian stock market appreciated by N13 trillion in 2023.
On the day of his inauguration, Tinubu had announced fuel subsidy removal and also went ahead to unify the foreign exchange rates. Both policies trigged investors’ confidence in some fundamental stocks.
Amid double-digit inflation rate, the market capitalisation closed 2023 trading on Fri day, at N40.918 trillion, representing an increase of N13 trillion or 46.6 per cent, from the N27.91 trillion it closed for trading in 2022.

Consequently, the Nigerian Exchange Limited All-Share Index (NGX ASI) hits an all-time high of 74,773.77 basis points, representing an increase of 45.90 per cent Year-to-Date (YtD) gain from 51,251.06basis points it opened for trading.
The new listing on the Exchange played a significant role on the NGX ASI all-time high record as the stock market continued on a positive trajectory.
The likes of MeCure Industries Plc, VFD Group, Nigeria Infrastructure Debt Fund (NIDF) and Africa Plus Partners added to the stock market positive trajectory in the period under review.

Major stock market indices reacted to the stock market trend in 2023, as the reforms impacted across key sectors on the Exchange
Specifically, the NGX Banking Index gained 114.90 per cent to 897.20basis points, NGX Oil & Gas Index rose by 125.54 per cent to 1,043.06 basis points as the NGX Industrial Goods Index added 12.86 per cent to 2,712.27 basis points.
Speaking on the 2023 stock market performance, the Chief Executive Officer, Wyoming Capital and Partners, Mr. Tajudeen Olayinka, said, “Market in 2023 was quite eventful and bullish.”
According to him, “We saw a market that picked its 2023 position way back in November 2022, when it was obvious that the three leading presidential candidates, namely: Asiwaju Bola Tinubu, Peter Obi and Alhaji Atiku Abubakar, that could succeed former President Muhammadu Buhari, were pro-market.
“And so, the build-up to the bullish run in 2023, that started in November 2022, was a demonstration of market confidence in a private sector-centric president.
“The inaugural speech of President Tinubu, with respect to fuel subsidy removal and exchange rate unification, eventually activated the market-wide pent-up confidence that had always been there but eluded the market ever since. This market-wide confidence remained throughout the year.”

On the expectations from the market in 2024, he predicted positive momentum for the Nigerian stock market.
Olayinka added, “And we can draw that from 2024 budget proposal of President Tinubu, where total reliance has been placed on the use of private capital in funding some important developmental projects across the country. In a way, we are going to see more public companies get listed on the stock exchange for the purpose of raising new capital, while the existing listed companies will not be left behind in this development.

“So, I see a very bullish and active primary market in 2024, even though, there could be occasional moderation in price movement across the board, as investors take profit and engage in portfolio rebalancing.
“The fact that private sector will take the lead in navigating the economy out of its prolonged state of disequilibrium, we will see a better capital market in 2024.”
On his part, the Managing Director, ARM Securities Limited, Rotimi Olubi, said 2023 tested the resilience of the Nigerian stock market against global agencies’ downgrades (FTSE and MSCI) and macroeconomic challenges including persistent inflation, high-interest rates, and foreign exchange losses.

“Despite all these, the Nigerian equities market proved to stand strong, hitting historic highs with the NGX All Share Index reaching an unprecedented 70,000 points and achieving an impressive 45.90per cent YtD return, culminating at 74,773.77 basis points by year-end.
“Reforms, notably FX liberalisation and the removal of petrol subsidies, spurred investor optimism, resulting in substantial gains, particularly in the Banking and Oil and Gas sectors.  Furthermore, impressive earnings in the face of inflationary pressures and FX losses further boosted investor confidence, contributing to the remarkable market returns,” Olubi said.

Looking ahead to 2024, Olubi explained that the market’s positive trajectory was anticipated to persist as investors position themselves favorably in dividend-paying stocks, anticipating the release of 2023FY earnings.
He expressed concerns over potential removal of selected Nigerian securities from the MSCI Frontier Markets Indexes, which could trigger sell-offs and potentially dissuade foreign investors.

“In 2024, focusing on stocks with robust fundamentals, particularly in the Banking and Oil and Gas sectors, remains advisable.
“The factors driving gains in these sectors in 2023 are anticipated to continue influencing early 2024 performance.”
Meanwhile, Nigeria’s external reserves dipped to a six-year low of $32.87 billion at the end of December, data showed yesterday, as the Central Bank of Nigeria (CBN) sold dollars to try to prop up the ailing naira currency.
A backlog of unsettled forwards, undelivered promises of dollar inflows and a two-decade peak in inflation had translated into a tumultuous year for the naira, which lost over 50 per cent of its value to become the third worst-performing global currency in 2023, Reuters quoted Kyle Chapman, FX markets analyst at London-based Ballinger & Co, to have said.

This prompted the CBN to run down its foreign exchange reserves, which peaked at $47.63 billion in June 2018, to defend the naira. The dollar reserve of Africa’s biggest economy in December dwindled to a level last seen in September 2017, when it stood at $32.16 billion.
“The naira’s downwards momentum is likely to continue through much of 2024, and its ultimate trajectory will depend on whether the CBN’s rhetoric transforms into concrete policy moves that drive up the flow of U.S dollars into Nigeria and shore up trust in the official market,” Chapman said.

Kayode Tokede

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