Investors have experienced significant gains of approximately N3.3 trillion over the past three weeks, as Nigerian equities have outperformed major global equities.
The stock market has witnessed a sustained rally, resulting in an average return of 5.49% at the weekend, which is the highest among major global indices.
This impressive performance has elevated Nigeria’s year-to-date return to 15.12%, positioning it favourably in terms of global share price appreciation for the current year.
During the weekend, the All Share Index (ASI), a comprehensive index tracking share prices on the Nigerian Exchange (NGX), reached 59,000.96 points.
This marks a 5.49% increase compared to the opening index of 55,930.97 points, resulting in a net capital gain of N1.67 trillion within the four-day trading session last week. The equities’ performance has surpassed that of other global indices, which have also displayed an overall positive sentiment.
In the United States (U.S.), both the Dow Jones Industrial Average and the S & P 500 Index concluded the week with average returns of 1.6% and 3.0% respectively. The FTSE 100 Index in the United Kingdom (UK) observed a 1.3% appreciation, while Japan’s Nikkei 225 Index rose by 4.5%. China’s SSE exhibited an average gain of 1.3%. Additionally, the STOXX Europe, a regional index tracking European markets, recorded an average gain of 1.2%. Among the emerging markets, the MSCI EM (Emerging Markets) experienced a 2.1% increase, while the MSCI FM (Frontier Markets) appreciated by 1.0%.
This strong bullish momentum has been sustained by local equities for three consecutive weeks. The administration of President Bola Tinubu has commenced the implementation of key policy reforms outlined in his manifesto and expounded upon in his inaugural address on May 29. Tinubu’s speech, regarded as favorable to the market, addressed various concerns relating to security, economy, infrastructure, and the monetary outlook. Specifically, the president directly tackled issues concerning multiple taxations, returns repatriation, foreign exchange (forex), and other matters important to investors.
“I have a message for our investors, local and foreign, our government shall review all their complaints about multiple taxation and various anti-investment inhibitions. We shall ensure that investors and foreign businesses repatriate their hard earned dividends and profits home,” Tinubu said, immediately after his inauguration at the Eagle Square, Abuja.
The newly established government has taken action to halt the fuel subsidy, eliminate multiple foreign exchange rates, and initiate investigations into significant matters concerning public finance.
Since May 29, the All Share Index (ASI) has shown a gain of 11.38%, starting at 52,973.88 points. This increase translates to net capital gains of N3.28 trillion over the course of the past three weeks.
Simultaneously, the total market value of all listed equities on the Nigerian Exchange (NGX) has risen from its initial value of N28.845 trillion on May 29 to N32.126 trillion at the weekend, representing a growth of N3.28 trillion.
Market experts concur that the sustained rally can be attributed to President Tinubu’s pro-market stance. Many analysts anticipate a resurgence in foreign direct and portfolio investments, which may result in the revaluation of Nigerian stocks. These stocks have been undervalued due to prolonged disinterest from foreign investors.
Mallam Garba Kurfi, the Managing Director of APT Securities and Funds Limited, noted that the market is responding to the anticipated reforms outlined in the president’s address.
Kurfi said: “The speech is excellent, especially as regards converging exchange rate into one; that will attract inflow of foreign Investors. The removal of fuel subsidy will attract more investments in the refineries and removal of double taxes will also bring more Investments into the country, and all these will reduce unemployment and increase productivities.”
Mr. Femi Ademola, the Group Executive Director of Investment Banking at Cordros Capital, expressed that the market’s response aligns with the expected pro-economic outlook of the Tinubu administration.
Ademola highlighted that the peaceful transfer of power and the president’s inaugural speech had a positive impact since market reactions are influenced by sentiments.
He further stated that the market is anticipated to exhibit a robust and favorable response to the government’s agenda, which includes the discontinuation of the fuel subsidy, reduced interest rates, the elimination of multiple exchange rates, and facilitation of capital repatriation for foreign investors.
Ademola emphasized that these measures are likely to attract investments back into the country, resulting in a strengthened exchange rate. He also emphasized the significant impact of lower interest rates as a notable aspect of the government’s initiatives.
“This may indicate that the administration will not be looking at attracting portfolio investment with high interest rates but more likely direct and patient investment that would stay for a longer period.
“While the market may still continue with its usual zigzag movements, the implementation of these policy reforms would ensure more positive movements on the market than negative.
“Supporting the monetary policy changes with the required fiscal reforms such as infrastructure development would add to the sustainability of the growth plan for the economy.
“I am happy with the inaugural speech and the plans of action as it is what is needed at this time. However, it has to go beyond words and intentions; the administration must hit the ground and run with the implementation of the policies.”
Chief Operating Officer at GTI Capital Group, Mr. Kehinde Hassan, said the general economic outlook enunciated by the president would herald new thematic growth for the economy.
He said investors appeared favourably disposed to the various initiatives, noting that the market response was a sort of a vote of confidence in the president’s economic direction.
Afrinvest Securities said “economy reform optimism” bolstered the market performance, noting that the “the rally in the market followed the promise of critical reforms by the President Bola Tinubu administration”.
Coronation Securities Limited said: “President Bola Ahmed Tinubu’s inaugural address was given yesterday (Monday), and it sparked the equity market’s imagination, with a rally of 5.23 per cent today (yesterday).
“The announcement of key market reforms, including phasing out fuel subsidies and unifying foreign exchange rates, shows that pro-market policies were not just items in the manifesto but issues which he is setting out to fix. If they are fixed, we expect much more from the equity market.”
