Key Points
- Market capitalisation fell from N160.42tn on Aug. 10 to N155.42tn on Aug. 19.
- Nigeria dropped to third among the world’s best-performing stock markets.
- Analysts link the sell-off to profit-taking, investor repositioning and expectations around the Dangote Refinery IPO.
Main Story
Nigeria’s equities market has surrendered about N5tn in value in seven trading sessions as investors continued to reduce positions in major stocks.
Market capitalisation, which reached N160.42tn on Aug. 10, declined to N155.42tn by Aug. 19, according to the report.
The retreat followed a strong rally that had pushed the market beyond the N160tn level and had made Nigeria the world’s best-performing stock market for five consecutive weeks.
Bloomberg data covering 92 exchanges showed that Nigeria’s dollar-denominated year-to-date return stood at 65.23 per cent as of Aug. 14. South Korea ranked first with 68.52 per cent, while Ghana was second at 66.68 per cent.
The reversal has raised questions about whether the market’s earlier gains can be sustained as investors reassess their positions following the sharp rise in equity prices.
Dr Paul Uzum, Executive Director of Halo Capital Management Ltd., attributed part of the selling pressure to investor repositioning ahead of the proposed Dangote Refinery initial public offering.
He said some foreign investors were also reducing their exposure to Nigerian equities as they positioned their portfolios ahead of the next general election.
According to Uzum, domestic investors are equally becoming more selective after the substantial gains recorded by several equities this year.
He said some investors were taking profits from stocks they considered fully valued and moving funds into alternative investment opportunities.
Uzum added that the anticipated Dangote Refinery IPO could be encouraging investors to sell existing holdings to generate liquidity for participation in the offer.
The selling pressure was reflected across several major sectors during the seven trading sessions under review.
In banking, Access Bank fell 3.24 per cent from N28.06 on Aug. 10 to N27.15 by Aug. 19, while United Bank for Africa slipped 0.54 per cent from N46.25 to N46.
First HoldCo recorded a sharper decline, dropping from N142 to N132, representing a 7.04 per cent loss.
BUA Foods was the biggest decliner among the selected fast-moving consumer goods stocks, falling 10 per cent from N845.10 to N760.60.
Honeywell Flour Mills recorded a smaller decline of 0.58 per cent, moving from N17.30 to N17.20.
Insurance stocks also came under pressure. NEM Insurance declined 5.21 per cent from N31.65 to N30, while AIICO Insurance fell 3.66 per cent from N4.10 to N3.95.
AXA Mansard Insurance recorded a 9.16 per cent decline, falling from N13.10 to N11.90.
The Issues
The market’s decline comes after a prolonged rally that delivered substantial gains to investors and pushed Nigeria to the top of global performance rankings.
The latest sell-off suggests that some investors may now be locking in profits, while others are repositioning ahead of major economic and political developments.
What’s Being Said
Uzum said foreign investors were adjusting their portfolios ahead of the next general election, while the proposed Dangote Refinery IPO was also influencing investment decisions.
He said some domestic investors were taking profits after strong gains and considering other asset classes that could offer better opportunities at current equity valuations.
What’s Next
The market’s direction will depend on how investors respond to prevailing valuations, the expected Dangote Refinery IPO and broader economic and political developments.
Continued profit-taking or portfolio repositioning could maintain pressure on major stocks, while renewed investor demand could help stabilise the market.
Bottom Line
Nigeria’s stock market has lost about N5tn in seven sessions after crossing the N160tn capitalisation mark, with profit-taking and investor repositioning contributing to a broad decline across major equities.
