Dangote, Nestle, others lift stock market first time in 8 months

Nigerian stocks have turned positive on a year-to-date basis for the first time since February led by gains from Dangote Cement and some of the country’s other large companies.

The benchmark stock index improved by 1.18 percent to close at 40,716.66 points at the end of Tuesday’s trading, thereby helping stocks to a year-to-date return of 1.11 percent as market capitalisation increased by N247 billion to close at N21.22 trillion.

“Dangote Cement, Nestle, Airtel and First Bank are among the companies that have helped Nigerian stocks turn the corner on a rout that started in February,” said Wale Okunriboye, head of investment research at Sigma Pensions.

“The market capitalisation of the companies have increased and that has led to the rare positive increase in the year to date return,” Okunrinboye added.

Dangote Cement’s market value has increased by 9.3 percent to N4.7 trillion as at October 6 from N4.3 trillion as at January 3, 2021, according to data compiled by BusinessDay. Nestle’s market value has similarly increased from N1.11 trillion to N1.17 trillion, a 5 percent rise year-to-date.

Although the year-to-date return of Nigerian stocks still trails that of the Johannesburg (+8.6 percent) and Nairobi (+7.9 percent) stock exchanges, the gap has narrowed, with the excess return of the Johannesburg exchange as against the NGX now at just 7.5 percent, down from a high of over 20 percent in the July-August period when the South African stocks reached new highs.

Read also: Nigeria stocks gain N247bn as investors take advantage of lower prices

Nigerian stocks have a stellar month of September to thank for closing the gap on peers.

The NGX outperformed its rivals in September, with a return of +2.6 percent, compared with a 0.5 percent return for Nairobi and a negative return of -4.7 percent for Joburg.

“The NGX’s favourable performance in September was largely attributable to domestic fund managers’ quarterly portfolio rebalancing, which encouraged buying interest in several bellwether stocks including Dangote Cement and Nestle Nigeria,” analysts at Lagos-based investment bank, FBN Quest said in a note to clients Wednesday.

Dangote Cement’s15 percent return for the month, in particular, contributed considerably to the NGX’s return.

“On the domestic front, we expect that the market will continue to be supported by domestic investors, spurred on by corporate actions (buyback announcements) and the broader economic recovery from the worst of the pandemic,” the analysts noted.

The recent rally in oil prices would have helped Nigerian stocks fare better assuming foreign investors were still active in the market, according to Ayodeji Ebo, head of research at Chapel Hill Denham.

Nigeria has fallen out of favour with the offshore community largely because of the fx liquidity constraints which has led to a pipeline of delayed external payments and taken a toll on foreign equity investors.

“Those constraints have put other frontier markets ahead of Nigeria at a time when the country could do with extra Foreign Portfolio inflows,” Ebo said.

The offshore community continues to favour other emerging/ frontier markets such as Egypt, Vietnam, and Bangladesh.