By Chukwuma Umeorah
Buoyed by positive market sentiments, strategic fund manager activities, favourable government policies and robust corporate earnings, Nigeria’s stock market has achieved a historic milestone, surpassing the 100,000 threshold for the first time. This landmark accomplishment yielded an impressive gain of N15.7 trillion for investors in the first half of 2024.
The All-Share Index (ASI), which began the year at 74,773.77 points, soared to 100,057.49 points by the end of June.
Concurrently, the market capitalization surged from N40.917 trillion to N56.601 trillion, marking a substantial gain of N15.68 trillion for investors over this period. As a result, the market’s year-to-date (YTD) return stood at an impressive +33.81 percent.
Market operators attributed this growth to favorable financial results and significant policy decisions, such as the removal of the fuel subsidy, the unification of exchange rates, the Central Bank of Nigeria’s (CBN) recapitalization policy, and the suspension of fund allocations to Bureau De Change (BDCs). These factors spurred investor interest in banking stocks, driving the equities market during the review period.
However, the second quarter did not maintain the same level of enthusiasm, experiencing a decline of 4.5 percent as market performance moderated. The initial exuberance gave way to a more cautious outlook as investors reacted to mixed earnings reports for Q1 2024 and ongoing issues such as rising interest rates and foreign exchange volatility.
Victor Chiazor, Analyst and Head of Research at FSL Securities Limited, provided a detailed analysis of the market’s performance across the first two quarters. He explained, “H1 performance was largely driven by strong dividend expectations from the banking sector, which had posted solid nine-month results and audited full-year performances for 2023. The banking sector led the price movement, creating a bandwagon effect that resulted in nearly 40 percent growth for Q1. However, this momentum slowed in Q2, with the market experiencing a decline of approximately 4.5 percent.”
Chiazor added, “If, as an investor, I am not expecting dividends and there are no impressive Q1 numbers, especially for the non-banking sector, it would be prudent to shift to the fixed income space, which offers returns of up to 16 percent for 91 days, 17.5 percent for 182 days, and over 20 percent for one year. Despite these challenges, the strong performance in Q1 maintained a positive outlook for H1 2024.”
Mike Eze, Chief Executive Officer of Crane Securities, emphasized the market’s responsiveness to information and policy changes. He noted that ongoing recapitalization efforts and upcoming public offers from major banks like Fidelity, Zenith Bank, GTCO, and UBA would likely drive significant investor interest in banking stocks. Eze expressed optimism for continued positive market sentiment in H2 2024, buoyed by anticipated strong half-year results and potential dividend payouts.
Eze remarked, “The performance in H1 is indicative of what to expect in H2. Positive sentiment will prevail, although occasional bearish phases are expected. Preliminary half-year unaudited accounts show improvements from the previous year, indicating a bullish outlook for the rest of the year.”
Analysts at Cowry Research also projected a strong start to the new trading quarter, albeit with mixed sentiment from market investors. They noted that the market would focus on the upcoming earnings reporting season and interim dividends from the banking sector and other companies.
They advised investors to take advantage of recent pullbacks and corrections to buy into value amidst ongoing portfolio repositioning ahead of Q2 numbers, setting the stage for the second half of the year. Investors are encouraged to seize opportunities in stocks with strong fundamentals.