Amid Challenges, GTCO, Seplat, Others Drive 45.90% Equities Market Gains In 2023
The domestic equities market segment of the Nigerian Exchange Limited (NGX) weathered the global and domestic challenges and appreciated by 45.90 percent in 2023.
Of note are Guaranty Trust Holding Company Plc from the banking sector, and Seplat from the oil and gas sector which played a major role in the gains of the exchange in the year that ended on Sunday, December 31.
The growth in the equities market, which analysts attributed to President Bola Tinubu’s courageous reforms such as foreign exchange unification and removal of fuel subsidies, pushed the NGX’s ASI to an all-time high of 74,773.77 basis points, representing an increase of 45.90 percent Year-to-Date (YTD) gain from 51,251.06 basis points when it opened for trading.
Equally, the market capitalisation closed trading in 2023 at N40.918 trillion, representing an increase of N13 trillion or 46.6 percent from the N27.915 trillion it closed for trading in 2022.
Major stock market indices reacted to the reforms which started in mid-2023 and impacted key sectors on the Exchange.
For instance, the NGX Banking Index gained 114.90 percent and rose to 897.20 basis points, the NGX Oil & Gas Index rose by 125.54 percent to 1,043.06 basis points while the NGX Industrial Goods Index added 12.86 percent to 2,712.27 basis points.
In the NGX banking index, Guaranty Trust Holding Company Plc, Zenith Bank Plc, FBN Holdings Plc and Stanbic IBTC Holdings Plc, United Bank for Africa Plc were the major drivers.
For instance, the stock price of UBA rose by 237.550 percent to N25.65 per share from N7.60 per share it opened for trading, while FBN Holdings gained 116.06 percent to N23.55 per share from N10.90 per share it opened for trading in 2023.
Stanbic IBTC Holdings appreciated by 108.22 percent to N69.65 per share from N33.45 per share it closed for trading in 2022, while GTCO gained 76.09 percent to N40.50 per share from N23.00 per share as of December 29, 2023.
For the Oil & Gas sector, Seplat Petroleum is a major driver, gaining 110 percent as the stock closed at N2,310 from N1,100.00 per share it closed for trading in 2022.
The stock market weathered double-digit inflation and weakened Purchasing Power to sustain its positive momentum in 2023 as investors reacted to the new administration reforms.
Commenting on the stock market performance, the Managing Director of ARM Securities Limited, Rotimi Olubi said 2023 tested the resilience of the Nigerian stock market against global agencies’ downgrades (FTSE and MSCI) and macroeconomic challenges including persistent inflation, high interest rates, and foreign exchange losses.
“Despite all these, the Nigerian equities market stands strong, hitting historic heights with the NGX All Share Index reaching an unprecedented 70,000 points and achieving an impressive 45.90 percent YtD return, culminating at 74,773.77 basis points by year-end.
“The market’s robust bullish trend began post the implementation of key policy reforms following President Tinubu’s administration’s inauguration on May 29th, 2023.
“These reforms, notably FX liberalization and the removal of PMS subsidies spurred investor optimism, resulting in substantial gains, particularly in the Banking and Oil and Gas sectors. Furthermore, impressive earnings in the face of inflationary pressures and FX losses further boosted investor confidence, contributing to remarkable market returns,” Olubi said.
Looking ahead to 2024, Olubi explained that the market’s positive trajectory is anticipated to persist as investors position themselves favourably in dividend-paying stocks, anticipating the release of 2023 FY earnings.
He expressed concerns over the potential removal of selected Nigerian securities from the MSCI Frontier Markets Indexes, which could trigger sell-offs and potentially dissuade foreign investors.
He added “Yet, given the relatively low foreign investor participation rate in 2023 (September 2023 YtD: 9.51 percent vs. September 2022 YtD: 16.30 percent), the market impact might be limited. Boosting confidence among foreign investors could be aided by the recent positive Fitch Ratings assessment, but persistent challenges like structural issues, the FX crisis, and inflationary pressures need addressing to attract increased foreign participation.
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