Investors Earn N2trn On Nigerian Equities In January

Investors in Nigerian equities earned more than N2 trillion in net capital gains last month, as the Nigerian stock market extended its bullish rally into the third consecutive year.

Nigerian equities closed yesterday with average year-to-date return of 9.15 per cent; equivalent to net capital gains of N2.04 trillion in January 2022.

The January 2022 rally extended the two-year consecutive rally of Nigerian stocks, which had closed 2021 with average return of 6.07 per cent, equivalent to net capital gains of N1.278 trillion.

Nigerian equities had in the throes of the outbreak of COVID-19 pandemic in 2020 recorded average return of 50.03 per cent, representing net capital gains of N6.483 trillion.

The benchmark index for the Nigerian stock market, the All Share Index (ASI) of the Nigerian Exchange (NGX), closed January 2022 at 46,624.67 points as against the year opening index of 42,716.44 points. It had opened 2021 at 40,270.72 points.

The ASI- a value-based common index that tracks all share prices at the Nigerian Exchange (NGX), is generally accepted as Nigeria’s sovereign equity index, a barometer for measuring pricing trend and investors’ mood at the stock market.

Aggregate market value of all quoted equities at the NGX rose from its year’s opening value of N22.297 trillion to close January at N25.124 trillion, representing a face value increase of 12.68 per cent or N2.83 trillion. However, the difference between the ASI and aggregate market value growth rate was due to unadjusted share capital changes, especially the listing of the BUA Foods Plc, which added N720 billion to primary market value.

Most market pundits have predicted continuing rally at the stock market, despite emerging political risks.

President, Chartered Institute of Stockbrokers (CIS), Mr Olatunde Amolegbe said two years of positive returns show that the market is reflecting its function as the barometer for the economy.

“We also expect the positive movement for the first half of 2022 on the back of good corporate performance, implementation of some part of the Petroleum Industry Act (PIA) and intense focus on infrastructural development and resultant increased capital raising by government and corporate entities,” Amolegbe said.

According to him, the implementation of the PIA has potential to raise government revenue, which may elicit a positive response from the market while infrastructural development would likely boost market activity.

“These however depend on stable macroeconomic policy, increased security and stable polity,” Amolegbe, who doubles as Managing Director of Arthur Steven Asset Management Limited said.

Managing Director, APT Securities and Funds, Mallam Kasimu Garba Kurfi also said the market would remain positive in 2022, although the second half would be determined by the politics of succession by the largest political parties.

“We expect the bullish rally to continue in first and second quarters but the continuity to the third and fourth quarters depends on the outcome of the primary election of the APC and PDP if they are able to succeed in electing the right candidates for the presidency. Acceptability will lead to bullish rally throughout the year, otherwise, the market may suffer a reversal,” Kurfi said.

Group Head, Research, GTI Capital Group, Mr. Emmanuel Onoja, said there was strong possibility of the market running through a third positive year.

“It’s most likely we see a third year of positive return given the potential liquidity buildup next year as a result of increased borrowing, election spending and falling yields,” Onoja said.

A full-year review of the 2021 performance showed that all major sectoral indices also closed 2021 positive, with the exception of the benchmark for the industrial goods sector. The NGX Oil & Gas Index led the rally with average return of 52.52 per cent. The NGX Insurance Index posted a full-year return of 4.54 per cent. The NGX Banking Index recorded average gain of 3.32 per cent.

The NGX Consumer Goods Index rallied net gain of 2.78 per cent. The NGX Pension Index, which tracks stocks specially screened in line with pension fund investment guidelines, rose by 16.96 per cent. The NGX Lotus Islamic Index, which tracks stocks that comply with Shari’ah rules, returned 5.74 per cent while the NGX 30 Index, which measures performance of Nigeria’s 30 largest quoted companies, closed with average return of 5.01 per cent.

Nigerian equities had played the full contrarian to close 2020 with net capital gain of N6.48 trillion. The ASI recorded average full-year return of 50.03 per cent in 2020, representing net capital gain of N6.483 trillion. The recent highest return was 42.3 per cent recorded in 2017. The ASI had closed 2020 at 40,270.72 points, 50.03 per cent above 26,842.07 points recorded as opening index for the year.

Also, at the NASD OTC Securities Exchange, the over-the-counter (OTC) market for trading in unlisted securities, the bulls directed the market in 2021. The number of deals, volume and value of activities rose by 233.42 per cent, 63.29 per cent and 158.88 per cent respectively in 2021. Turnover stood at 4,988 deals for 12.95 billion shares valued at N32.845 billion in 2021 as against 1,496 deals for 7.93 billion shares worth N12.69 billion in 2020. At 742.85 points, the NASD Security Index posted a year-to-date returns of 1.34 per cent while the OTC market capitalisation closed at N629.03 billion.

However, total transactions at the Nigerian equities market dropped by 12.4 per cent to N1.899 trillion in 2021.

Official full-year trading report released by the NGX showed that total transactions at the equities market declined from N2.168 trillion in 2020 to N1.899 trillion in 2021. The decline was majorly due to continuing decline in foreign portfolio investments (FPIs) participation in the Nigerian market.

A breakdown of the transactions showed that total turnover by domestic investors increased to N1.465 trillion in 2021 as against N1.439 trillion in 2020, thus the percentage contribution of domestic investors increased from 66.37 per cent in 2020 to 77.12 per cent in 2021.

However, FPIs dropped from N729.20 billion in 2020 to N434.5 billion in 2020, indicating 11 percentage points decline in contribution to total transactions from 33.63 per cent in 2020 to 22.88 per cent in 2021.

Domestic institutional investors remained upbeat about the market, with institutional investors increasing their participation in the equities market. Domestic institutional trading rose from N820.14 billion in 2020 to N886.61 billion in 2021, underlining the increasing inflows of pension funds into the stock market. However, retail domestic trading stood at N578.12 billion in 2021 as against N618.79 billion in 2020.