Nigerian stock market gains N18.2 trillion in 11 months amid macroeconomic challenges

The Nigerian stock market gained a total of N18.2 trillion in the first 11 months of 2024, driven by increasing inflationary pressures and the increase in the Central Bank of Nigeria (CBN) Monetary Policy Rate (MPR), among other macroeconomic challenges.

Since the start of 2024, the stock market has witnessed an unprecedented rally and buying interest, particularly in the financial services, consumer and industrial goods subsectors, which has continued to drive massive bargain hunting among major companies.

Specifically, the total market capitalization, which stood at N40.918 trillion at the beginning of 2024, increased by N18.2 trillion or 44.5 percent to close at N59.107 trillion on November 29, 2024, the last trading day of this month.

Consequently, the Nigerian Exchange Limited All-Share Index (NGX ASI) closed at 97,506.87 basis points on November 29, 2024, about 22,733.10 basis points or 30.4 percent of the 74,773.77 basis points recorded by the stock market for trading this year had opened.

THISDAY’s findings showed that new listings and investor interest in some blue-chip companies contributed to the stock market’s 30.4 percent year-to-date (YtD) growth as the local economy witnessed double-digit inflation, rising MPR and facing exchange rate volatility.

According to the National Bureau of Statistics (NBS), the inflation rate was 33.88 percent in October 2024, up from 28.2 percent in November 2023, while CBN’s MPR rose to 27.50 percent in November 2024 from 18.75 percent in November 2023 was increased.

“The meeting’s deliberations took place against a backdrop of renewed inflationary pressures as key food and core metrics rose year-on-year in October 2024. Members therefore unanimously agreed to remain focused on managing price developments,” the CBN Governor, Mr. Olayemi Cardoso had said.

This was the sixth time since February 2024 that the CBN has raised the interest rate. In September, the bank raised the interest rate to 27.25 percent after the country’s inflation rate fell in August 2024.

Another key macroeconomic challenge was the weakening of the Naira to N1,663,396 against the dollar in November 2024, from N942,117 against the dollar in November 2023.

Amid these challenges, foreign investors have increased their participation in the stock market, trading about N744.34 billion out of the N4.47 trillion in the ten months of 2024, compared to N291.38 billion of the N2.9 trillion transactions in the ten months of the year 2024 2023.

With the increasing participation of foreign investors in the stock market, companies such as Airtel Africa Plc., Dangote Cement Plc., Seplat Energy Plc., among others. and Guaranty Trust Holding Company Plc. their share prices increased significantly.

Checks by TUESDAY revealed that Dangote Cement share price increased by 49.7 percent year-to-date to close at N478.80 per share on November 29, 2024, while Airtel Africa gained 14 percent year-to-date to close at N156.90 per share Shares closed. Seplat Energy also gained 129 percent to close at N5, 300 per share on November 29, 2024.

Additionally, Zenith Bank Plc’s share price rose 15 percent year-to-date to close at N44.50 per share, while GTCO’s share price increased 30.7 percent year-to-date to close at N52.95 per share on November 29, 2024 .

The listing of Transcorp Power Plc. and Aradel Holdings, currently valued by market capitalization at N2.7 trillion and N2.25 trillion respectively, also contributed to the stock market growth of N59.107 trillion during the period under review.

With the stock market up 30.4 percent in 11 months, analysts believe the stock market is unlikely to outperform its performance in 2023.

The stock market gained 45.90 percent in 2023.

Commenting on the market performance in the first 11 months of 2024, Mr. Ambrose Omordion, Chief Operating Officer, InvestData Consulting Limited, said: “Trading on the exchange this year will be buoyed by renewed buying interest following a series of reforms that have picked up. “Foreign Investors Amid Mixed Corporate Scorecards of Listed Companies.”

He explained that many companies across various sectors achieved impressive numbers, while some posted mixed performance and others were disappointing.

On the market outlook, Omordion said: “We expect buying sentiment to continue as investors and bargain hunters react to December spending and the current increase in MPR by CBN.” However, he said: “Declines create buying opportunities amid the government’s economic reforms “As more policy announcements and economic managers make breakthroughs, a situation that is expected to ultimately set the tone for investment.”

For his part, investment banker and stockbroker Tajudeen Olayinka attributed the stock market gain in the eleven months of 2024 to the impressive corporate profits and policies of the Tinubu-led government, stressing that foreign investors in particular took advantage of the cheap price of some fundamental stocks on the stock market.

He added that the overall market performance was mainly driven by sentiment due to the smooth handover and bold economic policies of President Bola Tinubu on foreign exchange.

He pointed out that the stock market may witness a revaluation period in December 2024 due to the interest rate hike by CBN and the continued issuance of one-year Treasury bills with a high effective yield of over 20 percent.

“So it could be that we see a shift of investors to the bond market in December 2024,” he added.

Kayode Tokede