Nigeria’s Stock Market Shed N282.45bn In August
Nigeria’s stock market recorded a negative performance in the just concluded month as both the All-Share Index (ASI) and aggregate market capitalisation dropped respectively, leaving investors to suffer a loss of N282.45 billion.
The All-Share Index moderated by 1.06 per cent to close at 49,836.51 basis points on Wednesday, August 31, from 50,370.25 basis points it opened on Monday, August 1. Also, the market capitalisation dropped by 1.04 per cent to close at N26.88 trillion from N27.16 trillion.
Analysts have attributed the bearish trend to dovish sentiments, arising from a couple of issues.
Chief among the issues is political tension, being exacerbated by the forthcoming general elections of 2023, as a result, foreign portfolio investors are seen leaving the Nigerian equities market in droves.
The recent disclosure by the Nigerian Exchange Limited (NGX) shows that the percentage of foreign investors’ participation in the Nigerian capital market dropped by 14.6 per cent of the total N1.66 trillion recorded in the first half of the year.
There is also the shifting of investor interest to higher-yielding risk-free assets, like bonds and other fixed income security in the money market.
Policy rate hikes by the Central Bank of Nigeria (CBN), notably the Monetary Policy Rate, also known as the interest rate, from 13 per cent to 14 per cent by the Monetary Policy Committee (MPC) of the CBN in its July meeting, also contributed to the southward movement of the equities market.
Not to mention surging inflationary pressure as well as perceived volatility in foreign exchange, which is further smacking uncertainties and disorderly market dynamics.
As bearish sentiments continue to weigh on the domestic bourse, the Year-to-date (YTD) return of the market closed yesterday at 16.67 per cent.
Analysis of key sectoral performance showed that the industrial index suffered the highest drop, declining by 13.83 per cent to 1,777.14 basis points in the review month.
Notable companies’ stocks that weighed on the performance of the index were Dangote Cement and BUA Cement.
While the shares price of BUA Cement fell by 24.96 per cent to N52 from N69.3, Dangote Cement shares declined by 7.55 per cent to N245, from N265 in the month of August.
The oil and gas index also traded in the red zone, lower by 4.34 per cent to 532.15 basis points.
On the positive side, the insurance index saw the highest growth by 7.9 per cent to 180.23 basis points; the consumer goods index followed, rising by 4.76 per cent to 600.56 basis points; and the banking index rose by 2.43 per cent to 387.41 basis points.
While the share prices of other banks traded positive to put the banking index in the green territory, the stocks of Access Holdings and FCMB Group moderated in the review month, losing 7.78 per cent or 0.7k to N8.3, and 1.61 per cent or 0.05k to N3.05 respectively.
Trading activity for the review month was positive as the total volume of traded stocks appreciated by 44.18 per cent to 367.34 million units and the total value of stocks by 15.15 per cent to N3.24 billion.
“Monetary policy tightening typically has an adverse effect on the stock market and we may begin to see that impact on the Nigerian stock market if there is prolonged tightening,” Mo’ Omamegbe, a member of the MPC had said.
Omamegbe, in his personal note on the MPC communique released on Wednesday, explained that the growth of any economy is anchored on production and the ability of the capital market to provide avenues for businesses to access long-term capital to finance productive activities.
He added, “As the rate of inflation trends upwards, another challenge apparent, is how to deploy a monetary policy approach with outcomes that effectively balance the ravaging effects of inflation on the most vulnerable demographic of our population while maintaining the ability of businesses to raise long term capital from our markets for much needed productive activities.”
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