A Review on the Nigerian Stock Exchange Q1 2024

The recently released stats on the Nigerian Stock Exchange have revealed that there has been a positive progression due to the economic reforms implemented by the Bola Tinubu administration. Because of that, the Nigerian stock market provided investors with the second-best return in Africa in Q1 2024, with a gain of 39.84% year-to-date (YtD).

According to the currently available data, the Nigerian stock market beat all other exchanges during the examined period, except for the Zimbabwe Stock Exchange (ZSE) All Share Index, which experienced a YtD growth of approximately 314.19%.

Despite different macroeconomic hindrances, the NGX All-Share Index (NGX ASI) succeeded, even with growing insecurity, a double-digit inflation rate, and a recent increase in the Monetary Policy Rate (MPR) from 22.75% to 24.75%.

The NGX ASI, a performance measure for exchange-listed companies, closed on March 28, 2024, the last trading session for the first quarter of 2024, at 104,562.06 basis points, having increased by 39.84% from the start of the year at 74,773.77 basis points. Compared with the previous section, the NGX ASI rose 5.11% in Q1, 2023, to close at 54,232.34 basis points.

The stock market has seen an extraordinary surge since the start of 2024, along with a rise in buying interest, particularly in the consumer, financial services, and industrial goods subsectors. This has led to widespread bargain-hunting for large company shares.

The NGX Alternative Securities Market (ASeM) Index was announced as the best-performing index during the reviewed period, rising 135.25% YtD. Followed was the NGX Industrial Goods Index, which closed Q1, 2024 at 4,28441.20 basis points, up 78.49% YtD.

The YTD increases for the NGX Banking and NGX Insurance Index were 14.76% and 26.20%, respectively. Additionally, the NGX Consumer Goods Index increased by 43.66% year over year to close at 1,610.80 basis points on March 28, 2024.

Due to the positive impacts, the stock market was rated as the second best-performing in Africa, behind the Zimbabwean exchange, and key performance indices were pushed, stimulating market activity.

The NGX market capitalisation increased to N59.12 trillion at the end of trading on March 20, 2024, from N40.918 trillion when it opened for trading this year, a 44.49 percent increase of N18.2 trillion.

According to the monthly breakdown of market capitalisation, the stock market saw a gain of N14.44 trillion in January 2024 but a decrease of N650.5 billion in February due to investors pulling out of the Treasury Bills (T-bills) market amid corporate earnings by listed companies.

In addition, despite inconsistent corporate earnings by listed companies, the market capitalization increased by N4.41 trillion. 

According to capital market analysts, the stock market's performance in the first quarter of 2024 was influenced by the removal of fuel subsidies, mixed corporate earnings by listed companies, and federal government reforms in the foreign exchange market.

In response to the first quarter 2024 market performance, Mr. David Adnori, Vice President of Highcap Securities Limited, said sentiment drove investor trading.

According to Adnori, Tinubu's election as president boosted the stock market even more because investors trusted him to restructure the economy and enact policies that would benefit it.

Adnori expressed optimism that the stock market could sustain its upward trend in the second quarter of 2024, given the recapitalization of the banking sector and the anticipated 2023 corporate earnings, particularly from the banks. The first quarter results and accounts for March 31, 2024, further reinforced his optimism.

Capital market experts reported that sentiment trading had occurred among investors who viewed the fixed-income market as an alternative investment opportunity to protect against double-digit inflation during the MPR hike to 24.75%.

Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), stated during the committee's second Monetary Policy Committee (MPC) meeting in 2024 that the committee's decisions were primarily based on the pressures of rising inflation expectations, projected inflation, and current inflationary and exchange rate pressures.

Cardoso said, "Members were concerned about the persistent rise in inflation and emphasised the committee's commitment to reverse the trend as the balance of risk leaned towards rising inflation.

"The committee, however, acknowledged the trade-off between pursuing output growth and taming inflation but was convinced that an enduring output expansion is possible only in an environment of low and stable inflation."

An Investment banker and stockbroker, Mr. Tajudeen Olayinka, stated that the drive by many investors to hedge against an inflationary spiral put their buy interests in equity.

Olayinka stated, "And this is demonstrated by simultaneous rise in interest rates and equity prices. Beyond this analogy, the economy is still grossly awash with Godwin Emefiele's N30 trillion illegally printed for the use of former President Muhammadu Buhari's administration.

"So, there is excess liquidity in the system, chasing fewer profitable investment opportunities in the economy."