Available records have shown that investors’ expectations that ongoing economic reforms will stimulate improvements in macroeconomic performance and investment returns are yielding results.
The economic outlook has pushed transactions at the stock market up by 22 per cent, the latest trading data obtained at the Nigerian Exchange (NGX) showed.
The transactions crossed the N2 trillion threshold to N2.15 trillion between January and August.
It is the best performance since 2014, when the NGX began the publication of its monthly foreign portfolio investment report.
The decade-old publication is a general report that captures transactions by local and foreign investors at the Nigerian market.
The high-value trading pattern, according to our source; The NATION, comes simultaneously with sustained rally in share prices, a market pattern showing the buy side driving trading more than the sell side.
The rise in investors’ demand allows sellers to optimize their sell orders at higher prices, thus ensuring that deals are closed at premium price.
The stock market operates a 10-per cent daily share price movement range, a band within which a share price can rise or fall in a day.
At the weekend, the Nigerian equities’ year-to-date return rose to 27.92 per cent, one of the five best returns among tracked advanced and emerging global stock markets; including United States (U.S.), United Kingdom (U.K.), France, Germany, Japan and China.
Analysts’ consensus at the stock market that the bullish trend witnessed in recent period was driven partly by positive investors’ perception of the pro-market administration of President Bola Tinubu.
The Director-General, Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, said a stakeholders’ meeting of the capital market, which ended at the weekend, was optimistic that ongoing reforms would rejuvenate the economy and lead to a brighter future.
Yuguda spoke on the highlights of the discussions at the Capital Market Committee (CMC), a consultative assembly of stakeholders in the Nigerian capital market.
At least 277 stakeholders attended the CMC meeting, including management and senior staff of SEC, capital market operators (CMOs), representatives of relevant government agencies including the Central Bank of Nigeria (CBN), Debt Management Office (DMO), Federal Inland Revenue Service (FIRS), Investments and Securities Tribunal (IST), National Insurance Commission (NAICOM), National Pension Commission (PENCOM), and Financial System Strategy 2020 (FSS2020).
The NGX has also attributed the market performance to the “audacious macroeconomic reforms under the new administration” of Tinubu.
According to the NGX, market operators were of the view that “the policies of the new administration under President Bola Tinubu” had “led to the rise in the fortunes of investors”.
Afrinvest Securities had said “economy reform optimism” bolstered the market performance, noting that the “the rally in the market followed the promise of critical reforms by the President Bola Tinubu administration”.
Analysts at Arthur Steven Asset Management attributed the equities market’s bullish momentum “to the new administration which tends to affect the market positively.
“The market reacted to the high expectation from the new administration as the government promised the investors easy repatriation of their investment and profit,” Arthur Steven Asset Management stated.
The report, for the period ended July 31, 2023, showed that total transactions for the seven-month period increased to N2.154 trillion in 2023 as against N1.763 trillion recorded in the comparable seven-month period of 2022.
A month-on-month analysis of the trading values showed that the 2023 performance largely driven by the bullish trading that has characterized stock market transactions since Tinubu’s inauguration.
Total transactions for the first four months of 2023 stood at N721.44 billion, slightly above N702.98 billion recorded in July alone.
Total transactions for the three-month period of May to July stood at N1.433 trillion, about 99 per cent above total transactions in the first four months and 66.53 per cent of total transactions so far this year.
The further segmental analysis of the report indicated considerable improvements in investors’ sentiments. Domestic retail investors’ turnover has risen by about 32.7 per cent in 2023 compared with similar period of 2022 while domestic institutional investors’ turnover rose by 31.9 per cent.
The report also showed improvement in foreign portfolio investments, with a trading pattern that suggests foreign investors were taking advantage of the relative ease in access to foreign exchange (forex) and the high returns at the Nigerian market to run a profit-taking trading pattern.
For instance, while foreign inflows saw remarkable improvements from the recent lows in May and June 2023, foreign outflow was substantial in July 2023.
Share price analysis underlined that the bullish trend at the stock market was driven by widespread positive sentiments as all indices at the NGX remain substantially positive.
The benchmark index, the All Share Index (ASI) – a value-based common index that tracks all share prices at the NGX, closed weekend with year-to-date return of 27.92 per cent. The average return was driven by gains across the sectors.
In most of the sectors indexed by the NGX, average year-to-date returns are higher than the overall market return.
These include NGX Oil and Gas Index, 93.01 per cent; NGX Consumer Goods Index, 70.23 per cent; NGX Insurance Index, 55.48 per cent; NGX Banking Index, 54.19 per cent while the NGX Industrial Goods Index, recorded average return of 18.62 per cent.
