The Nigerian equity market was relatively quiet in the month of October with lower volumes and values traded compared to previous months as the market anticipated the release of Q3 performance numbers. Chinazom Izuora, Senior Associate Investment Brokerage at Parthian Securities Limited, offers some insightful commentary on the performance of the market during the month of October. Her analysis clarifies the main points that happened and provides an idea of what investors and the Nigerian economy might face going forward. Let’s dive in.

Market Highlights in October 2023

The highlight in the month of October was the listing of the Nigeria Infrastructure Debt Fund (NIDF) and the VFD Group. 

The market also received news of upcoming rights issues in the securities of JAIZBANK and FBNH pending the approval of the Securities and Exchange Commission (SEC); additionally, the NGX reclassified 4 securities from low to medium cap – FCMB, NEM, ETRANZACT and FIDSON.

The market began to pick up at the tail end of October as Q3 financials started hitting the market. 

What’s driving the bullish run of the market?

The Nigerian equity market has been in an uptrend since April on the back of corporate actions this was followed shortly by the buy interest in Transcorp and FBNH, but the market really started rallying after the inauguration of the new administration on the back of policy pronouncement and expectations of how such policies are likely to impact the performance of listed companies.  The end of fuel subsidy rallied oil & gas stocks and the liberalization of FX the banking and financial services sectors.

Movements in highly capitalized (High-Cap) stocks such as BUA Foods, Dangote Cement, Airtel Africa and Geregu have also been instrumental in raising the ASI this year.

It’s intuitive that consumer goods and industrial goods companies haven’t fared as well this year because of the negative impact or cost push of devaluation and rising oil prices on their operating expenses coupled with expectations of lower consumer demand due to the inflationary pressures and high cost of living.

Is there any connection to the FG’s intention to securitise NLNG’s dividend?

The movements so far have been independent of this decision, however if the securitization takes the form of a bond or equity listing, we can expect to see an increase in the All-Share Index (ASI) as new products and listings contribute to the growth and development of the market, create positive sentiment, and incentivize more participation in the Nigerian Capital market.  As the government’s primary objective around the securitization is FX liquidity, we might not see a product or listing.   The expected impact of better FX liquidity in the country is to prevent the free-fall of the Naira and ensure access to FX for productive reasons. If the government successfully fixes the FX issues, we might see this positively impact on the consumer goods and industrial goods companies come 2024.

What is the outlook for the economy and investors?

The policy direction of the new administration has been received with cautious optimism however the lack of proper stakeholder management, timely communication and efficient execution of the policies have left the market sceptical that the outlined objectives will be achieved. Nigeria also doesn’t exist in a vacuum so global economic and financial issues such as rising interest rates, rising oil prices and regional tensions between Israel & Palestine, Russia & Ukraine and the possible spillover effects of these also impact the outlook for Nigerian companies. The investing public will be looking for proactive management of these issues by the government in the spirit of stimulating economic growth and ensuring stability in the country.  Investors should look out for quality and sustainability in selecting investment instruments in 2024.