Despite the compounding damage from the COVID-19 pandemic and the Russian invasion of Ukraine, which has magnified the slowdown in the global economy, the country’s capital market activities remain positive in the first half of 2022 as both local and foreign investors on the Nigerian Exchange Limited (NGX) traded N831.83 billion worth of equities.
N485.4bn worth of equities was traded in the second quarter (Q2) of the year, representing an increase of 40.11 per cent when compared to N346.43bn traded in the first quarter (Q1).
The growth in value of equities market traded also reflected in volume as it gained 143.83% to 54.27bn in Q2, 2022 from 22.26bn reported in Q1 2022, while deals on the bourse rose by 8.5% to 320,778 in Q2 2022 from 295,533 reported by the NGX for Q1 2022.
Notwithstanding the war in Ukraine, lockdowns in China, supply-chain disruptions and the risk of stagflation are hammering growth, the equities market segment of the NGX witnessed positive sentiment trading by investors’ participation in listed fundamental stocks, leading to the market capitalisation closing Q2 2022 at N27.94 trillion from N25.31tr it closed in Q1 2022.
The NGX All-Share Index appreciated by 10.3% to 51,817.59 basis points in Q2 2022 from 46,965.48 basis points in Q1 2022.
The data disclosed that the value of Fixed Income traded rose by 38.7% to N1.01tr in Q2 2022 from N728.9bn reported in Q1 2022.
According to the data by the NGX, the volume of fixed income traded moved to 972,206.00 in Q2 2022 from 688,564 reported in Q1 2022.
In addition, the market capitalisation of fixed income moved from N21.42tr in Q1 2021 to N22.23tr in Q2 2022.
In terms of sector performance, the Oil and Gas Index with a gain of 58.06% was the best performing. This was largely due to the rise in global oil prices. It was followed by the Industrial Good Index, which gained 7.21% within the period while the Consumer Good Index was up by 5.88%.
The Banking and Insurance Index lost 2.04% and 9.98% respectively.
While appraising the market, the Managing Director of APT Securities and Funds Ltd, Mallam Garba Kurfi in a chat with Daily Trust, said available data for the half year showed a 61% increase in the total NGX market turnover and 21.31% gain in ASI compared to the same period of the previous year.
“Among the factors that contributed to this is that most of the major capitalised stocks, that is, Airtel Africa, MTNN, Dangote Cement and BUACEMENT, which control over 70% of the total Market Capitalisation gained about 50% during the period under review and qualified to be Invest by PFAs, which they did,” he said.
The MD of ARM Securities Ltd, Mr Rotimi Olubi, said the improved participation by local investors in the market and the strong earnings result from some stocks in the consumer and industrial goods as well as some banks buoyed investor sentiment.
“The performance of the capital market has been impressive in H1 2022. The equities market recorded stellar performance in the first half of the year crossing 50,000 points (highest since 2008) in the 18th week and 54,000 points at the end of the 21st week. We allude this strong performance to decent earnings released by firms, especially in the industrial sector, (Dangote Cement, Lafarge Cement and BUA Cement), telecommunications sector (MTNN and Airtel Africa) and consumer goods and staples (Guinness, Cadbury and Intbrew, Dansugar) and the banking sector (GTBank, UBA, Accesscorp Fidelity),” he said in an exclusive interview with Daily Trust.
How local investors shielded Nigeria from global disruption
He added 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.
“As of May 2022, according to data released by NGX, domestic participation accounts for 93% while foreign participation equals 7%. Domestic participation to foreign participation was 87.23% vs 12.77% in January 2022,” he said.
Nigerian stock market outperform others in Africa
Despite negative sentiments that dominated global markets, the Nigerian Stock Market outperformed all other African Markets in the first half of the year, emerging as one of the best-performing stock markets in the world.
In the United States, the S&P Index, which measures the broader stock market has fallen by as much as 20% this year. Over in Europe, the London FTSE is down by about 3% while the German DAX is also down by a whopping 19.3%. In Africa, the Johannesburg Stock Exchange is down by 11%, and Ghana is down by about 8%. Kenya is down 16.9% and Egypt of 10% as of June 29, 2022.
The Chief Financial Officer, Parthian Partners Limited, Olayinka Arewa, said a record number of issuers took advantage of increased market liquidity and launched Commercial Paper and Bonds.
“In particular, there were more debut issuance from new issuers tapping into the capital markets for funding,” he said.
He called for quicker turnaround times in reviewing applications in order to ensure a better result in the second half of the year.
The CEO, Wyoming Capital & Partners, Mr Tajudeen Olayinka, who also identified improved liquidity in the system in the last six months for the positive performance of the Nigerian stock market, added 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.
“Negative real return in the fixed income market and the need to hedge against inflation. Equity market is an inflation adjusting market, and so, some investors who were willing to hedge against inflation, irrespective of the downside risk that the market poses, decided to bring liquidity back to the equity market,” he said.
At a recent CEO Roundtable, capital market stakeholders commended NGX for providing a vibrant listing platform for government and corporates to meet their business objectives.
Speaking on the benefits derived from listing on the Exchange, CEO MTN Nigeria Communications Plc, Mr. Karl Toriola, noted that MTN had received incredible support from NGX in its listing journey, which has enabled the brand to deepen and diversify its shareholder base.
He mentioned that NGX’s corporate governance requirements and strong guidance provide credibility around the capital market and grant access to the wider public. He further explained that MTN Nigeria’s recent public offer launched on the Exchange saw about 78% of women subscriptions with 80% under the age of forty-one which shows the drive for financial inclusivity.
CEO, BUA Foods Plc, Engr Ayodele Abioye, said that listing on the Exchange allows for democratisation and public participation, which has enhanced the credibility of the BUA brand. “Listing on NGX presents opportunities for companies to raise capital, fund business growth and implement expansion plans.
“In the first few weeks of our listing our shares valued at N18bn on the Exchange, increased by 66%. As our share prices continue to stabilise, our shareholder base has grown by about 400% since listing on the Exchange and we are beginning to see investors’ confidence in our business,” he added.