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By Chukwuma Umeorah
The Nigerian equities market closed the week on a bearish trajectory, accentuated by a 2.94% decline in the All-Share Index (ASI), which ended at 102,353.68 points.
The slump resulted in a significant N1.45 trillion loss in market capitalisation, which fell to N62.85 trillion from the previous week’s N64.3 trillion.
The year-to-date (YTD) performance also slipped further into negative territory, standing at -0.56%, reflecting persistent challenges in the market. Analysts attributed the downturn to a combination of macroeconomic pressures, including rising inflation, investor caution, and heightened market volatility.
Sectoral performance was mixed, with some stocks experiencing sharp sell-offs as investors adjusted their portfolios amid the uncertain economic outlook.
The wider sentiment in the market remains tepid, as concerns over policy clarity and corporate earnings weigh heavily on trading activities.
Market stakeholders are, however, cautiously optimistic about a potential rebound, with expectations of a turnaround driven by anticipated reforms and improvements in the broader economic landscape. The coming trading sessions will be critical in setting the tone for the market’s trajectory in the near term.
Cowry Research in their weekly review note stated that the downturn, attributed to macroeconomic uncertainties and profit-taking had eroded investors confidence amid persistent inflation and portfolio realignments. A key driver of the week’s bearish performance was Nigeria’s rising inflation rate, which reached 34.80 per cent in December 2024. This marks a 0.20 percentage point increase from November’s 34.60 per cent. According to the Central Bank of Nigeria (CBN), which has maintained a tight monetary stance by raising the benchmark interest rate to 27.50 per cent, inflationary pressures remain resilient despite these measures.
According to Cowry, “the inflationary surge is due to structural issues, including high energy costs, inadequate infrastructure, and logistical inefficiencies. Adding to market concerns, the National Bureau of Statistics is set to conclude the rebasing of the Consumer Price Index (CPI) by the end of January 2025. This rebasing, which adopts 2024 as the new base year, is expected to provide a more accurate measure of price trends. However, the updated methodology may also reveal more nuanced inflationary pressures that could shape investor decisions in the near term.”
The decline in the market was broad-based, with most sectors recording losses. The Nigerian Exchange (NGX) Industrial Goods Index experienced the steepest drop, falling by 8.20 per cent, followed by the NGX Insurance Index, which declined by 6.23 per cent . The NGX Oil and Gas Index also fell, albeit marginally, by 0.78 per cent. The NGX Banking Index, which has remained a cornerstone of trading activities, posted a slight decline of 0.46 per cent during the review week.
In contrast, the NGX Consumer Goods Index stood out as the only gainer, appreciating by 1.33 per cent. This was largely driven by investor interest in stocks such as Northern Nigeria Flour Mills Plc (NNFM), Dangote Sugar Refinery Plc, and Nascon Allied Industries Plc, which posted gains of 19.54 per cent, 16.67 per cent, and 15.85 per cent, respectively. The performance of these consumer goods companies reflected investors’ confidence in sectors that demonstrate resilience in the face of economic headwinds.
The week also saw significant price movements in individual stocks. Neimeth International Pharmaceuticals Plc led the gainers’ chart with a 31.42 per cent increase in its share price, closing at N3.43, up from N2.61. SCOA Nigeria Plc followed with a gain of 20.39 per cent, while NNFM recorded a 19.54 per cent increase. On the losing side, Universal Insurance Plc suffered the heaviest decline, shedding 19.23 per cent of its value to close at N0.63, down from N0.78. Dangote Cement Plc, a heavyweight in the industrial sector, also recorded a significant loss of 16.46 per cent, closing at N400.00, compared to its previous week’s value of N478.80.
Trading activity on the floor of the Nigerian Exchange was subdued compared to the previous week. Investors traded a total of 2.252 billion shares worth N58.83 billion in 63,657 deals. This represents a 41.4 per cent decline in trading volume and an 18.1 per cent drop in value when compared to the 4.698 billion shares valued at N85.04 billion traded in the preceding week. The Financial Services Industry led the activity chart by volume, accounting for 1.371 billion shares worth N22.27 billion traded in 26,114 deals. This sector contributed 60.86 per cent and 37.86 per cent to the total equity turnover volume and value, respectively.
The Consumer Goods Industry followed with 253.536 million shares worth N15.24 billion, while the Services Industry recorded a turnover of 193.424 million shares worth N931.80 million. Universal Insurance Plc, Guaranty Trust Holding Company Plc, and AIICO Insurance Plc emerged as the top three equities by volume, collectively accounting for 468.315 million shares worth N9.01 billion. These three stocks contributed 20.79 per cent and 15.31 per cent to the total equity turnover volume and value.
Analysts opine that the persistent inflationary environment continues to weigh heavily on household and business expenses, exacerbating the challenges for listed companies and their stakeholders. The inflationary surge, coupled with rising production costs, has created a more cautious trading environment. Investors are now eagerly awaiting the release of fourth-quarter earnings reports, which could influence market sentiment in the coming weeks. The upcoming Monetary Policy Committee (MPC) meeting is also expected to shape market dynamics as stakeholders look for further insights into the CBN’s monetary policy direction. In this climate, analysts advise investors to focus on companies with strong fundamentals, as they are better positioned to weather current economic challenges and offer long-term value.
Despite the week’s bearish performance, market watchers identify opportunities for discerning investors. The significant price declines in major stocks, coupled with potential bargain hunting, present attractive entry points for those seeking to capitalize on undervaluation. The consumer goods sector, which posted gains amid the overall market decline, is particularly notable for its resilience and growth prospects, offering glimmers of hope for a market recovery in the near term as projected by some analysts.
