In a display of resilience, Nigeria’s stock market has achieved significant growth, adding N15.66 trillion in market capitalisation within the first nine months of 2024, despite facing challenging economic conditions including soaring inflation and a volatile foreign exchange market.
As of September 27, 2024, the market capitalisation of the Nigerian Exchange Limited (NGX) soared to N56.578 trillion, a remarkable increase of 38.27% from N40.918 trillion at the end of 2023. The NGX All-Share Index (ASI) also reflected this positive trend, closing at 98,458.68 basis points, translating to a Year-to-Date (YtD) gain of 31.7% compared to 74,773.77 basis points in the previous year.
Despite Nigeria’s inflation rate climbing from 28.92% in December 2023 to 32.15% in August 2024, and the naira trading at N1,637.69 to the dollar, investor activity remained robust.
The Central Bank of Nigeria (CBN) has raised the Monetary Policy Rate (MPR) to 27.25%, up from 18.75%, in a bid to curb inflation. Nevertheless, these economic hurdles have not deterred investors from capitalising on opportunities within the stock market.
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“Investors are trading based on sentiment,” noted Mr. David Adnori, Vice President of Highcap Securities Limited. He attributed part of the market’s dynamism to the leadership of President Bola Tinubu, expressing optimism in his economic reforms. “Market participants have hope in his ability to rejig the economy and implement economy-friendly policies.”
The surge in market capitalisation can be attributed to increased foreign investment, which accounted for 18.86% of market participation as of August 2024, a notable rise from 9.22% in the same period last year. This uptick in foreign involvement was particularly evident in major stocks such as Dangote Cement Plc and Airtel Africa Plc, both of which experienced substantial price increases.
Dangote Cement’s share price rose by 66.3%, closing at N532, while Airtel Africa increased by 17%, reaching N2,200 per share. The positive performance of these stocks has significantly contributed to the NGX Industry Index, which closed at 3,847.83 basis points, up 42% from the start of the year.
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Moreover, the banking sector’s ongoing recapitalisation efforts, mandated by the CBN, alongside impressive corporate earnings reports for the first half of 2024, have buoyed investor sentiment towards banking stocks. Guaranty Trust Holding Company Plc, for instance, reported a 17% increase in its stock price, reaching N47.4 per share.
Mr. Tajudeen Olayinka, an investment banker and stockbroker, highlighted the influence of institutional investors in the market, stating, “The N15.66 trillion gain indicates a significant presence of liquid funds among institutional investors, who are positioning their portfolios for a brighter future.”
Looking ahead, analysts predict a balanced market where investors will continue to exercise their rights to additional shares, while also considering fixed-income investments as alternatives amid high interest rates.
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