The Nigerian Stock Exchange (NSE) cannot seem to get a break from the bears as it reversed the gains earned in the previous week. Last week, the All Share Index, the indicator of aggregate performance of the NSE rose by 325 basis points to close at 27,800.17 index points. Investors in the capital market were all smiles as about N83.0 billion was gained.
However, just a week later, their joy was short-lived as the NSE returned to what we have been accustomed to in the last 12 months, a bearish market performance. The ASI dropped from 27,800.17 points to 27,525.81 points, a 99-basis points reduction from the previous week. Consequently, investors in the market lost a whopping N133.5 billion to the downturn in the market.
In a note to clients last week, Lagos based asset Management Company, Growth & Development Asset Management asserted that the gains made by investors in the previous week were likely going to be reversed. Their assertion was based on the lack of any major policy driver to jump start the market. This prediction was spot on, as the market proceeded to descend lower 5 trading days later.
Our analysis of the market performance this week revealed that 4 of the major indices of the market declined with the oil & gas index leading the pack by about a 10.8 percent led by Seplat’s share price declining by about 18.84 percent. Jeremiah Ejemeyovwi, an economist and lecturer at Covenant University acknowledged that with downturn in crude oil prices, falling global demand and strong dollar within the last few weeks, it is not surprising that Seplat declined the most given its position in the upstream sector.
In a previous comment by Obinna Uzoma, a chief economist at investment research firm, EUA Intelligence explained that “as the Dollar strengthens, the pegged Naira is at a higher risk of overvaluation and monies invested in the stock market falls in dollar terms if a currency devaluation occurs. As this risk heightens, foreign portfolio investors would prefer to liquidate their positions in the Nigerian stock market as a hedge to that risk of devaluation.”
An investor in the stock market who pleaded anonymity mentioned that right now, he is tired of waiting for improvements in the NSE as his risk has not been rewarded with returns and would be liquidating his investments in favour of fixed income investments.
Year-to-Date (YTD) analysis of the stock market shows that the NSE’s ASI is down by 12.42 percent, worsening from the previous market dip of 11.55 percent.
