Nigeria’s 47.2 stock market return is the best in Africa in 2013 and players in the Nigerian stock market raked in more money in the past 12 months than their peers in other major African exchanges, such as the Johannesburg and Nairobi exchanges, the results show.
The market’s best performance in the past five years was driven by relative stability of the naira, which impacted foreign portfolio inflows (FPI), increased liquidity across the globe that resulted from the US Fed’s quantitative easing (QE) programme, and improved investor appetite in Nigerian equities.
The stock market returned 47.2 percent in 2013 –the best performance since 2008.
Considering the position of foreign investors in the Nigerian stock market, their search for growth in emerging markets supported the bullish trend which brought the Nigerian market into the news across the globe – thus reflecting sustained investor appetite for Nigerian equities.
The sterling performance at the end of 2013 shows the market had beat analysts’ consensus and expectations. The 47.2 percent return in 2013 compares with 35.5 percent in 2012. The market cap peaked to N13.226trillion (compared N8.97trillion at the end of 2012), while the Nigerian Stock Exchange (NSE) All Share Index which tracks the performance of the bourse ballooned to above 40,000 points psychological level (compared with 28,078.81 points at the end of 2012).
With the level of market cap at the end of 2013, it implies that portfolio of investors worth grew by N4.25trillion. Looking at the implications of a stellar 2013 for equities, FBN Capital analysts said they are not ruling out yet another January rally in 2014, adding that “stretched valuations across many blue-chip names and the onset of a pull back in QE by the US Fed leads us to be more cautious in our outlook on equities for 2014.”
“The oil and gas index’s gain of 121.9 percent surpassed any of the other sectors. However, in market capitalisation terms, the cement sector was dominant given that Dangote Cement which accounted for 24 percent of the index at the start of the year gained 71 percent during the year (at the end of 2013 its weighting had risen to 28percent). Nestle Nigeria, which gained 71.4 percent also had a marked impact on the index’s performance. Assuming Dangote Cement and Nestle Nigeria were flat through 2013, the NSE ASI would have returned 37percent”, these analysts at FBN Capital added.
“Beyond the attractive valuation of the market, benign domestic macroeconomic variables and prolonged monetary stimulus in the U.S. and Europe provided support for the rally on Nigerian stocks. Notably, the gain was concentrated in January and May. Whilst the 35percent return in 2012 triggered investor appetite and a ‘herd instinct’ in January, leading to strong pricing across all stocks, positive earnings release and expectation of delayed stimulus tapering in the U.S. stimulated the gains in May,” UBA Capital analysts noted.
Taking a cue from this performance, Charlie Robertson, an economist with Renaissance Capital noted why investors must look at Nigeria.
He said: “Because from May 2014, it will be 20 percent of the MSCI frontier index (the key benchmark for equity investors in frontier markets) – today it is 14% of that benchmark. Because from February 2014, we should see that Nigeria is the biggest economy in Africa at over $400billion. Because it has one of the best reform teams in any country globally; electricity reform is working. Growth of 7 percent a year since 2000 means Nigeria’s GDP is on course to be bigger than 2012 Japan by 2050, at over $5 trillion in today’s money by 2050. We like Nigeria for the first quarter of 2014.”