The Nigerian Exchange’s (NGX) capitalization decreased by N857 billion as a result of political unrest, inflationary pressure, and a shortage of local currency in the domestic economy.
Nigerians went to the elections to choose their country’s leaders on February 25 and March 18, 2023, which caused foreign investors to sell several basic equities on the Exchange.
Also, the National Bureau of Statistics (NBS) reports that the inflation rate climbed from the 21.82 percent recorded in January to 21.91 percent in February 2023, having an influence on investors’ returns on stock market investments.
Although the market capitalization of the stock market increased by N2.44 trillion in the first quarter to close at N29.544 trillion on March 31, 2023, up from N27.915 trillion when it first opened for trading on January 3, 2023, its performance in March declined by N857 billion from N30.401 trillion to N29.544 trillion when it closed for trading.
The NGX All-Share Index, a gauge of general market performance that measures the movement of all listed stocks on the Exchange, increased by 5.11 percent to close at 54,232.34 basis points in the first quarter of 2023 from 51,595.66 basis points on December 30, 2022.
In March, the NGX ASI fell by 2.82 percent, from 55,806.26 basis points to 54,232.34 basis points.
The decline was influenced by investors profit-taking in Airtel Africa Plc, MTN Nigeria Communications Plc, and Dangote Cement Plc.
The stock price of Airtel Africa dropped to N1,479.00 per share, a decline of 8.7 per cent from N1,620.00 per share it opened for trading in March while Dangote Cement show its stock price closing March at N270 per share, representing a decline of 2.9 per cent from N278 per share it opened for trading.
The stock price of MTN Nigeria Communication moved to N240.00 per share in March from N245.00 per share it closed in February 2023, representing a decline of 2.04 per cent.
Amid controversies, the stock price of Seplat Petroleum dropped by 13.2 per cent to N1,150.00per share in March from N1,325.00 it closed for trading in February 2023.
However, the sector performance in Q1 2023 was bullish as most indices closed the period on uptrend as at March 31, 2023. NGX Consumer Goods index appreciated the most by 19.32 per cent. NGX Premium Board index followed with a gain of 11.97 per cent, while NGX Oil & Gas index rose by 10.45 per cent.
Others are NGX Lotus II index, NGX Banking index, NGX Pension index, NGX 30, NGX Industrial Goods index and NGX Insurance went up by 8.79 per cent, 8.50 per cent, 6.35 per cent, 4.93 per cent, 2.21 per cent and 1.81 per cent in that order.
Financial analysts noted that the positive sentiment during the period was as a result of change in the holding structure of the market since foreign investors left the market on the grounds of COVID-19 and local investors dominated with increased buying interest due to the better-than-expected corporate earnings post-COVID and higher dividend payouts.
Commenting, Managing Director of HighCap Securities Limited, Mr. David Adonri said the
equities market will survive current political uncertainties because investors are futuristic that the prospect for yield environment is bright saying, “we are in the earning season, when the market normally sustains positive sentiment, but this season is within the period of an election. I think the crave for dividend is overshadowing what would have been the impact of the elections.”
Also, in a recent report from Cordros Securities Limited said, “we expect investors positioning for 2022 full year results ahead of upbeat corporate earnings and re-investment of dividends to drive bullish sentiments in Q1, 2023.
“Nevertheless, in the latter part of the year, we believe that market sentiments will be shaped by a combination of the outcome of the 2023 elections; market-friendly policy or reforms; the direction of monetary policy and impact on fixed income yields; sector-specific events; and the weak macroeconomic environment.”
The investment firm added that, “we believe there is scope for slight expansion in valuation multiples in H1, 2023 as long as corporate earnings remain resilient. Thus, investors will likely continue to seek relative safety in value stocks as they remain concerned about the market’s volatility, political and economic uncertainties, and higher interest rates.”
Meanwhile, analysts have advised investors to trade with caution as the uncertainties continued to rock the 2023 elections, maintaining their positive outlook on dividend yields and capital appreciation in bellwether stocks.
Speaking on the outlook of the stock market in 2023, the Managing Director/Chief Economist at Analysts Data Service and Resources Limited, Dr Afolabi Olowookere, had disclosed that while recent evidence suggests the market performance during pre and post elections comes out negative, it is expected that the stock market might close in the negative territory at the end of the year.
According to him, “The past may not necessarily be the one we might see in future. In the last three years of election, the market had closed in the negative and so looking at it, stock market returns might likely close at -16 per cent at the end of the year and this will be centered on factors like uncertainties around the outcome of the elections, low capital inflows and rising inflation.”
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