Capital market players foresee election year turbulence, recovery


In this piece, UTHMAN SALAMI examines the performance of the stock market in 2022 and stakeholders’ expectations for this year

Despite the harsh economic environment, the Nigerian stock market was resilient, putting up a better-than-expected performance in the 2022 trading year, according to market observers.

The Nigerian Exchange posted a 19.98 per cent return in 2022, outperforming the country’s economy which advanced 2.25 per cent as of November.

The Chief Executive Officer of Enterprise Stockbrokers, Rotimi Fakayejo, said investors in the local bourse had a bumper year in terms of payout, adding that the payout system and other factors made the market a better stead, which reflected in the capitalisation and the All-Share Index.

Amid imported inflation which raised the cost of living, Nigerians increased their stock portfolio investment, which contributed to the positive performance of the local equity market.

According to data from the Nigerian Bureau of Statistics, the annual inflation rate grew for the 10th consecutive month to 21.47 per cent in November, 2022, from 21.09 per cent in October, the highest in 17 years.

Analysts attributed the surge in inflation to the increase in demand for goods and services, persistent naira depreciation, and the rise in the cost of production.

To tame the rising inflation, the Monetary Policy Committee of the Central Bank of Nigeria adopted a hawkish approach, hiking the interest rate four times in 2022 from 11.5 per cent at the beginning of the year to 16.5 per cent in November.

Market observers and operators had presumed the tight policy approach of the apex bank would drive investors from the equity market to the debt market. However, the performance of the market in 2022 proved otherwise.

The high sides

The investors in the Nigerian Exchange gained N5.618tn between January 4, 2022, when the market opened and the close of business on December 30, 2022.

Despite the global economic risk, the Nigerian stock market’s capitalisation grew from N22.297tn as of January 4, 2022, to N27.915tn as of December 30, 2022.

In the period under review, the NGX All-Share Index grew by 19.98 per cent to 51,251.06 basis points amid volatility in stock markets across advanced countries, caused by risk assets sell-offs by investors.

Market observers who spoke with The PUNCH attributed the resilience of the market to domestic investors’ positive sentiment towards the equity market.

A research analyst at Atlas Portfolio, Olaide Baanu, said,  “Nigerian stock market has been one of the most resilient markets despite all the economic turbulence we had in 2022, coming from the external economic factors coupled with the internal ones.”

The resilience, he said, was induced by the financial performance of stocks that had good fundamentals.

He explained, “The performance has been good, given the economic environment of the country in terms of security and what has happened in the larger economy, whereby the inflation rate has been on the rise.

“When looking at the Nigerian stock, we have really not done badly. Even after the terrible things that have happened such as currency transformation, insecurity, and others, the market still remained stable.”

Market newcomers

The listing of BUA Foods Plc and Geregu Power Plc brought plum and flamboyance to the overall market capitalisation.

BUA Foods Plc was listed on the Nigerian Exchange on January 5, 2022, boosting the market capitalisation of the NGX by over N1.17tn.

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