Investors in the Nigerian stock market made over N1.13 trillion as dividend incomes from listed equities, real estate investment trusts, and exchange-traded funds from January to December 2022.
Dangote Cement led the dividend chart as it paid N340.81 billion to its shareholders, representing 30 percent of the total dividend paid by the firms listed on the Nigerian Exchange Limited (NGX) in 2022. MTN Nigeria paid N113.95 billion, representing 10 percent of the total dividend incomes realised by shareholders.
Other listed firms that rewarded their shareholders in 2022 are BUA Cement, which paid N88 billion; Zenith Bank, N87 billion; Guaranty Trust Holding Company, N79.5 billion; Nestle Nigeria, N40.03 billion; and Airtel Africa, N36.5 billion.
United Bank for Africa paid N27.4 billion; Stanbic IBTC Holdings, N25.9 billion; and Access Bank, N24.9 billion.
BusinessDay’s analysis of the performance of equities listed on NGX in the last four years showed that the first four months of a new year always turn out to be the best time for a rally in equity prices. The last week of December 2022 signalled that investors have started positioning themselves to tap the opportunity the New Year rally will offer.
The NGX ended 2022 with a positive return of 19.98 percent. This is higher than the return of 2021, when the All Share Index appreciated by 6.7 percent.
According to BusinessDay’s analysis, the market capitalisation of listed equities on the NGX gained N6.27 trillion between January 1 and May 31, 2022, buoyed by the listing of BUA Foods, Dangote’s share buyback programme, and investors who positioned themselves for this year’s dividend season.
In 2021, listed equities gained N1.02 trillion in market capitalisation between January and May. During the same period in 2020, the gain in market capitalisation of listed equities was N210.02 billion; N193.13 billion in 2018, and N950.81 billion in 2017, which implies a steady increase in gains in market capitalisation from 2017 to date.
“Broadly speaking, we expect a negative market sentiment in the first quarter of 2023, to be caused possibly by additional rate tightening by the Central Bank of Nigeria and election risks,” said Tajudeen Ibrahim, senior analyst at Chapelhill Denham.
“However, there are some stocks, especially the dividend-paying stocks that usually declare dividends between March and April, as well as new business opportunities for telecommunications companies, and these could override the broad market sentiment early 2023,” Ibrahim added.
He said the new business opportunities for telecommunications companies include expansion in the nation’s mobile money market on account of the cashless policy drive of the monetary regulatory authority, and consistent dividend paying by tier-one banks, among others.
Boboye Olaolu, a senior analyst with CardinalStone, anchored the development in the nation’s capital market on the 2023 presidential election, saying the leading candidates are pro-market as they have promised Nigerians fiscal and foreign exchange reforms.
He said: “General elections will be held in the first quarter of 2023, and the outcomes will go a long way to determine what will happen in Nigeria thereafter. What is obvious is that the leading presidential candidates are pro-market, who are interested in fiscal reforms, FX reforms and removal of subsidies. If Kenya could remove the subsidy, Nigeria should also have the leverage to remove it progressively.
“Based on our projections, we foresee GDP growth rate hovering between 2.5 percent to 2.8 percent; the premium between official and parallel market FX rates to remain; yield in the fixed income market to trend upwards in the first quarter, but will moderate starting from April when some bonds mature, and thereafter, we expect investors to start looking at the equity market especially for fundamentally sound stocks.”
Nigeria recorded a 2.25 percent real growth rate in the third quarter of 2022 while inflation soared to 21.47 percent in November 2022.
Read also: Stock market ends 2022 with 19.98% return
Another factor that will favour equity rally in 2023 is the dominance of domestic investors in the nation’s capital market as this is expected to moderate market volatility. Domestic participation at the nation’s bourse stood at 83.33 percent while foreign participation was 16.67 percent as of November 2022. In 2021, domestic participation averaged 77.07 percent while foreign participation was 22.93 percent.
“Total domestic transactions increased by 10.31 percent MoM to N89.95 billion, However, total foreign transactions decreased by 49.46 percent MoM to N14.43 billion. Foreign investors’ participation in the equities market continues to trend southwards amid volatility in the equities market, FX illiquidity and elevated yields in the domestic and foreign fixed-income markets which have led to the exit of low-risk appetite investors’ to a safe haven,” ARM Securities said in a note to investors in December.
From the global perspective, the Nigerian equity market will also be affected by the growth trends in the United States and Eurozone, considering the predictions of some foreign analysts in respect of 2023.
“Even if inflation continues in 2023, it will be expected, and much less likely to have the negative impact it had in 2022. That just leaves questions about the size and length of the recession. The expectation is that it will last through the first six to nine months but won’t be deep or scarring,” Michael Hartnett, chief investment strategist at BofA Global Research, said when asked about the global outlook for 2023.
“If that’s the case, bonds certainly should do better than in 2022, and eventually the stock market will follow. If you look at the overall expected returns for those asset classes, a 60/40 portfolio should generate a positive return in 2023.”
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