Nigeria’s stock market jumped on Tuesday to its highest level since July 2008 as investors interpreted the suspension of Godwin Emefiele as CBN governor as the end of unorthodox monetary policies that have spooked foreign investments.
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and equities Market Capitalisation increased by 3.99 percent or N1.22 trillion on Tuesday from preceding 55,930.97 points and N30.455 trillion respectively to 58,163.59 points and N31.670 trillion.
This takes the year-to-date (YtD) return of the market to +13.49 percent, more than double the six percent return on the MSCI index.
Nigeria’s largest banks were up as much as 10 percent Tuesday morning in Lagos as investors cheered the end of unorthodox policies by the suspended CBN governor.
Stocks like United Bank for Africa, Zenith Bank, Access Bank, Guaranty Trust Bank, First Bank of Nigeria Holdings neared a one-year high.
Emefiele’s suspension by President Bola Tinubu last Friday is being interpreted as the end of the country’s damaging multiple FX rates that sowed confusion among foreign investors and deterred capital inflows.
Investors also expect that with Emefiele out of the picture, the banking sector will get a new lease of life with the possible end of arbitrary CRR debits that has long affected the sector’s profitability.
Banking stocks like UBA, GTCO, Zenith Bank and Access Corporation were actively traded as investors raised significant bet on banking stocks.
Meanwhile, Nigerian Eurobonds were roughly flat on the day after an initial surge Monday in reaction to Emefiele’s suspension.
Nigeria’s 2025 Eurobond is now yielding single digits at 9.2 percent. Yields on the 2025 Eurobond had been in the double digits over the past year and a half.
Asset managers including hedge funds and real money investment funds are driving buying activity in the Eurobonds.
Meristem research analysts in their June 13 said they anticipate a positive mood on the local bourse due to increased investors’ confidence.
“This is following recent policy announcements by the new president and the suspension of the former CBN boss. Furthermore, we expect foreign investors to view these developments in a positive light.
“Thus, we expect increased buying activities on tickers, especially in the banking sector. Additionally, with the expectation of lower rates at the scheduled, T-bills auction this week, fund flow from the equities market to the fixed-income market should be minimal.
“Overall, we expect the market to close positively this week barring significant profit-taking on bellwether tickers that could potentially move the market in the opposite direction,” said Meristem research analysts.
Meristem analysts want investors to hold banking stocks like Access Corporation, FCMB Group, Fidelity Bank, FBN Holdings, GTCO, Stanbic IBTC Holdings, Union Bank and Zenith Bank. They advised investors to buy stocks of UBA and ETI. The analysts believe that these stocks have upside potentials compared to their current prices.
“We expect mixed sentiments from investors. We expect the prevailing positive sentiments to stir up further buy-interests in anticipation of H1-2023 earning season. On another hand, profit-taking activities will weigh on the bourse’s performance, as investors seek to book their gains off profitable counters.
“We continue to encourage a cautious approach toward the Nigerian equities market. For equity-vested fund managers and investors, we recommend bargain hunting exercises across fundamentally sound stocks with improved or relatively cheap valuations,” according to United Capital research analysts.
The Lagos-based analysts target prices (TPs) for banking stocks like Access Corporation, FBN Holdings, FCMB, Fidelity Bank, GTCO, Stanbic IBTC Holdings and Zenith Bank imply upside potential for the counters. In their recommendations for this week, United Capital analysts advised investors to hold these shares.