In Five Months, Nigerian Investors Lose N1trn

Nigerian equities closed weekend with average negative return of five per cent, implying a net capital depreciation of more than N1 trillion for investors in quoted shares.

The stock market capped its losing streak this month with a net loss of N35 billion last week, raising the average return so far in the month to 3.96 per cent.

Benchmark indices for the Nigerian equities market showed widespread depreciation across most sectors with investors in highly influential banking and industrial goods sectors recording the highest losses.

The All Share Index (ASI) – the value-based common index that tracks all share prices at the Nigerian Exchange (NGX) Limited, formerly Nigerian Stock Exchange (NSE) – opens the last trading session in the month today at 38,256.95 points, five per cent below 2021’s opening index of 40,270.72 points.

Aggregate market value of quoted equities has also dropped from the year’s opening value of N21.057 trillion to N19.940 trillion.

Sectoral price analysis showed widespread negative sentiment across the market with the exception of the insurance and oil and gas sectors.

The NGX Oil and Gas Index posted double-digit return of 36.69 per cent to play the lead contrarian in the market.The NGX Insurance Index, which tracks insurance stocks, recorded the second highest gain of 8.41 per cent.

On the negative side, the NGX Banking Index recorded the highest loss of 9.60 per cent.The NGX Industrial Goods Index trailed with a negative return of 9.41 per cent. The NGX 30 Index, which tracks the 30 largest stocks at the NGX, posted a negative return of -5.35 per cent while the NGX Consumer Goods Index depreciated by 1.79 per cent.

Most analysts remained cautious of the outlook for the Nigerian stocks, citing the tough macroeconomic outlook and socio-political risks.

“We still expect a choppy theme in the week ahead, with the bears dominating proceedings in the absence of positive triggers to spur a bullish performance,”Cordros Group stated.

Analysts at Afrinvest Securities, however, said investors might seek to take advantage of the recent price depreciation to accumulate shares.

“In the new week, we expect the domestic equities market to trade sideways as investors rebalance their portfolio in favor of high dividend paying stocks with good fundamentals,” Cowry Asset Management stated.

Analysts, however, were unanimous on their stock recommendations, urging investors to take positions in fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings.

Meanwhile, total turnover last week stood at 1.037 billion shares worth N9.471 billion in 17,577 deals as against a total of 1.048 billion shares valued at N11.543 billion traded in 17,233 deals two weeks ago.

The financial services sector led the activity chart with 687.623 million shares valued at N5.659 billion traded in 9,506 deals; thus contributing 66.29 per cent and 59.75 per cent to the total equity turnover volume and value. The conglomerates sector followed with 106.138 million shares worth N545.020 million in 1,146 deals while the information and communication technology sector placed third with a turnover of 84.310 million shares worth N350.698 million in 604 deals.

Trading in the top three equities, namely Zenith Bank Plc, Guaranty Trust Bank Plc and Fidelity Bank Plc (measured by volume), accounted for 229.453 million shares worth N4.281 billion in 3,634 deals, contributing 22.12 per cent and 45.20 per cent to the total equity turnover volume and value.

Amid the COVID-19 pandemic and economic recession, Nigerian equities had played the full contrarian to close 2020 with net capital gain of N6.48 trillion. Benchmark indices at the NGX showed average full-year return of 50.03 per cent by the sound of the last closing gong for the 2020 business year.

This implied net capital gain of N6.483 trillion. The recent highest return was 42.3 per cent recorded in 2017. The ASI closed 2020 at 40,270.72 points, 50.03 per cent above 26,842.07 points recorded as opening index for the year.

Aggregate market value of all quoted equities at the NSE rose to N21.057 trillion by the end of 2020 as against N12.958 trillion recorded as opening value for the year, an increase of N8.1 trillion. The additional increase in value of market capitalisation, above the ASI percentage change, was due to additional or supplementary listing of shares during the year.

While a steep decline of 18.75 per cent in March 2020 had driven the first quarter to a negative return of -20.7 per cent or net loss of N2.68 trillion, the market recovered in the second quarter with positive average return of 14.12 per cent or net capital gains of N1.656 trillion. It continued its rally with average return of 9.61 per cent or net capital gains of N1.23 trillion in third quarter 2020.

The recovery since 2020 is, particularly, spectacular when viewed against the background of negative performance in recent years. After posting a world-ranking return of 42.3 per cent in 2017, the market had reversed to negative in 2018 with average full-year return of -17.81 per cent. In 2019, investors suffered net loss of about N1.71 trillion with negative average return of -14.60 per cent. Prior to 2017, the stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015.

Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion.