By Chukwuma Umeorah
August saw a notable downturn in Nigeria’s equity market, with the overall index slipping by 1.22%. The decline was primarily driven by a significant sell-off in industrial stocks, which overshadowed gains in other sectors like oil & gas, insurance, consumer goods, and banking.
The NGX Industrial Index faced a severe drop of 13.06%, heavily influenced by a sharp fall in the share price of Dangote Cement—a major component of the sector. This decline not only impacted the industrial index but also weighed heavily on the broader market index. Despite these struggles, other sectors demonstrated strong performance: the NGX Banking Index rose by 6.52%, and the NGX Oil & Gas Index surged by 22.45%.
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) fell from 97,774.22 points at the start of August to 96,579.54 points by month-end. Market capitalization also decreased from N55.513 trillion to N55.477 trillion. This drop in market capitalization, amounting to N36.03 billion, was largely attributed to the poor performance of the industrial sector.
The industrial sector’s troubles were significant, with the NGX Industrial Index dropping by 13.08%. Dangote Cement’s significant share price decline played a major role in this downturn. Conversely, the NGX Banking Index saw an increase of 6.52%, while the NGX Oil & Gas Index experienced a remarkable gain of 22.45%.
Year-to-date returns, which had peaked at 30.76% in August, fell to 29.16% by the end of the month, reflecting the impact of the industrial sector’s poor performance. Mike Eze, the Chief Executive Officer of Crane Securities, attributed the shift to a more cautious investor sentiment.
“The market was previously on a bullish trend, but investors are now focused on taking profits,” Eze explained.
He continued: “Some sectors stocks have experienced significant appreciation. However, given the economic challenges, investors are hesitant to hold onto their investments for extended periods.
In his intervention, Olatunde Amolegbe, the Chief Executive Officer of Arthur Stevens Asset Management, observed a shift in investor behaviour, with a growing interest in new investment opportunities rather than maintaining existing positions in the secondary market. “The focus is moving towards new offers, which is diverting attention away from the secondary market,” Amolegbe explained. He remained cautiously optimistic about September, suggesting that a continued easing of inflation might prompt the Central Bank of Nigeria (CBN) to adopt a more accommodative stance on interest rates, potentially stabilising the market.
The rise in appeal of fixed-income instruments, particularly treasury bills with competitive yields, has also influenced investor behavior, drawing funds away from equities. Nonetheless, August saw some standout performances among individual stocks. Oando Plc soared by 207.6%, Julius Berger’s share price climbed by 75.77%, and RT Briscoe experienced an extraordinary increase of 367.10%, highlighting that despite a general market decline, select stocks delivered impressive gains.
Trading activity was subdued for much of August, but investor confidence received a boost towards the end of the month following the release of Nigeria’s second-quarter GDP report. The report revealed a robust 3.19% year-on-year growth, surpassing the 2.51% recorded in the same period last year.
Looking forward, analysts at Cowry Research are hopeful for a market rebound. “We anticipate increased position-taking and portfolio adjustments,” they noted. “The NGX shows signs of recovery, and we expect investors to capitalize on market pullbacks to acquire undervalued stocks.” The optimism suggests that, despite recent challenges, opportunities for growth and investment in Nigeria’s equity market remain promising.
Trading performance for the first 3 weeks were tepid, however, as August came to a close, investor confidence was bolstered by Nigeria’s second-quarter GDP report, which revealed a 3.19 per cent year-on-year growth, exceeding the 2.51 per cent recorded in Q2 2023. Despite the overall market downturn in the month, certain stocks performed exceptionally well. Oando Plc surged by 207.6 per cent, while Julius Berger’s stock rose by 75.77 per cent. RT Briscoe experienced a dramatic 367.10 per cent increase in its share price, underscoring selective strong performances despite the general decline.