From May to July 2023, the market buzzed with a significant number of equity transactions. However, this high activity level surprisingly slowed down in August, with total transactions falling by a substantial 62.65%. Additionally, foreign investors, who initially showed increased interest post the inauguration of the new administration, have seemingly pulled back, as evidenced by the waning participation witnessed in July and August.

So, why such a drastic drop-off in August equity transactions?

Generally, market momentum is fuelled by expectations and available information. The inauguration of the new administration, combined with its promising policy direction, initially encouraged a market rally. However, without new drivers or information, and increasing uncertainty surrounding the new policy implementations, the transaction volumes understandably eased off in August.

Interestingly, this isn’t a situation unique to Nigeria. The markets worldwide are also grappling with a global cost of living crisis, further intensified by supply chain constraints emanating from the Russia-Ukraine crisis.

Does the decline in interest from foreign investors signal potential issues?

While the rise of interest rates in developed economies and more anticipated rate hikes might have steered foreign investors away from international investments, this trend doesn’t spell immediate trouble. Our market has been primarily domestic driven since 2019. Still, with effective economic policies that stimulate growth, there’s potential for regaining foreign investor interest and participation.

Will we see a continuation of this declining trend in September and October? Performance figures for Q3 will be released in October, potentially triggering renewed market activity. However, barring any significant news that could influence the outlook of listed firms, it’s expected that the market may remain relatively quiet for some time.

What does this imply for your stock investment?

These market trends could present buying opportunities for long-term investors. As prices fall, stocks of good companies may become available at lower costs. However, patience is necessary as there may be short-term volatility.