Inflation, FX scarcity shave off N1.6trn from Nigeria’s stock market in April
Despite some very impressive 2022 corporate earnings and dividend payout to shareholders of quoted companies, investigations has revealed that market capitalisation of the Nigerian Exchange Limited (NGX) fell N1.580 trillion at the end of transactions in April.
Although the stock market gained 2.25 per cent in four months of 2023, inflationary pressure, scarcity of foreign exchange, among other macroeconomy challenges continued to erode investors’ participation in low-priced fundamental stocks listed on the exchange.
Specifically, the All Share Index (ASI) which opened at 54,232.54 points, in the month under review, however closed at 52,403.51 points, representing 3.37 per cent drop, while market capitalisation closed the month at N27.963 trillion from the opening value of N29.543 trillion.
This meant that investors lost N1.580 trillion in one month. Sectoral performances revealed that NGX-Main Board Index depreciated by 3.71 per cent to close at 2,349.99 basis points, while NGX banking Index was down 1.55 per cent to 438.07 basis points as of April 28, 2023.
The NGX Insurance Index appreciated by 3.87 per cent to 184.38 basis points, NGX Oil/Gas Index dropped by 1.68 per cent to 502.24 basis points. In addition, NGX Consumer Goods Index appreciated by 4.75 per cent to 736.14 basis points, the highest gainer among other indices on the floor of the Exchange, while NGX Industrial Goods Index depreciated by 0.38 per cent in April 2023.
Market operators in a chat, noted that the decline could have been worse if transactions had not ended in the positive territory in the last weekin the month under review.
They attributed the decline in the stock market due to fall-out of the 2023 general elections, soaring inflation and the scarcity of FX alongside other macro-economic issues in the country.
The Nigeria’s stock market had gained N2.48 trillion in January and February 2023, although the month of March saw bearish sentiments pervading the local bourse amid bargain hunting activities as market began reacting to the weak macro-economic trend.
This meant that investors lost about N857 billion in March.
However, the Chief Executive Officer, NGX, Temi Popoola, believes that the exchange will continue to stick to its strategic goals this year.
Popoola said, “We did not have a bad start and I can assure you that we will be using listings as a vehicle for meeting strategic aspirations as the new dispensation comes in through increased advocacy and engagements”.
Reacting to the performance of the market, analysts at Cordros Research said that given the Q1 2023 earnings season, they expect decent earnings releases across board to temper selling activities and support positive sentiments on the bourse.
They said, “In the medium term, we expect investor’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income space. Overall, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings
