The Nigerian stock market has recorded a major gain of 64.11 per cent from July 2023 to June 2024, as the All-Share Index of the Nigerian Exchange Limited (NGX) rose to 100,057.49 points. This was revealed in the latest Fund Manager’s Report published by the Nigerian Exchange Limited.
The strong performance of the equity market was largely due to renewed interest from foreign portfolio investors and local investors, as well as impressive corporate earnings from listed companies. The report showed that several sectors recorded notable growth, especially the industrial, oil and gas, and consumer goods sectors.
According to the report, the NGX Industrial Goods Index had the highest return of 88.43 per cent, driven by the rise in the share price of Dangote Cement Plc, owned by Africa’s richest man, Aliko Dangote. Dangote Cement played a key role in boosting investor confidence in the industrial segment.
The Oil and Gas Index followed with a return of 82.95 per cent. This was mainly supported by strong trading activities in Seplat Energy Plc, TotalEnergies Marketing Nigeria Plc, and Oando Plc. These companies recorded significant price movements as investors showed interest in the energy sector, especially with the rising global oil prices.
The Fast-Moving Consumer Goods (FMCG) Index also appreciated by 75.84 per cent within the one-year period. This was driven by high demand for stocks of companies like BUA Foods Plc, Dangote Sugar Refinery Plc, Flour Mills of Nigeria Plc, and Honeywell Flour Mills Plc. The acquisition of NASCON Allied Industries Plc contributed to the buying interest in the FMCG sector, as investors responded positively to the move.
The banking sector also recorded gains. The NGX Banking Index rose by 20.46 per cent, as the Central Bank of Nigeria (CBN) introduced several regulatory measures to strengthen the financial sector. These included the new bank recapitalisation policy, adjustments to the net open position, cash reserve ratio (CRR), the asymmetric corridor, and increases in the monetary policy rate (MPR). The recapitalisation directive, which requires banks to raise more capital, had a positive impact on the sector despite market volatility.
In the insurance sector, the NGX Insurance Index recorded a 38.42 per cent gain. This was led by renewed investor interest in stocks such as AIICO Insurance Plc and AXA Mansard Insurance Plc, as investors looked to diversify their portfolios and take advantage of opportunities in the non-banking financial sector.
However, the report also pointed out rising inflation as a major concern. Nigeria’s inflation rate climbed from 21.82 per cent in January 2023 to 28.92 per cent in December 2023. It later rose further to 34.19 per cent by June 2024. The increase in inflation was caused by several factors, including the continuous depreciation of the naira, disruptions in food supply, removal of fuel subsidy, and challenges in transport and storage infrastructure.
To control inflation and attract foreign investment, the Central Bank of Nigeria raised its benchmark interest rate multiple times. In February 2024, the MPR was increased to 22.75 per cent. It was later raised to 24.75 per cent in March and again to 26.25 per cent in May. The apex bank also adjusted other monetary tools like the CRR and asymmetric corridor to limit excess liquidity in the system.
Despite these challenges, Nigeria’s economy grew by 2.74 per cent in 2023, although this was below the Federal Government’s target of 3.75 per cent as stated in the Medium-Term Expenditure Framework (MTEF). The economy grew by 3.00 per cent in the second half of 2023, while the first half of 2024 recorded 3.08 per cent growth. The growth was driven by government spending, rising consumer demand, and moderate export activity.
The report explained that the slow GDP growth was linked to the effects of high inflation, tight monetary policy, and external factors like global economic slowdown and foreign exchange issues.
On the international scene, global economic growth fell to 3.0 per cent in 2023, down from 3.5 per cent in 2022. The United States recorded a growth rate of 3.1 per cent, while China faced slow growth due to weak consumer demand and reduced foreign direct investment. Africa’s economy also slowed down to 3.2 per cent from 4.1 per cent in the previous year.
In the fixed-income market, yields on Treasury Bills increased sharply. The 364-day Treasury Bill rate jumped from 5.94 per cent to 20.68 per cent over the same period. However, rising inflation made it difficult for investors to enjoy real returns on their investments.
Ajediran Omololu, the fund manager who led the report, said the fund’s investment strategy for the next financial year would focus more on sectors expected to grow, considering the current challenges of inflation, high interest rates, and exchange rate fluctuations.
