Nigeria’s positive Q4 GDP not enough for stocks

Nigerian stocks are almost unrecognisable today from where they were at the start of the year, and not even a return to the growth of Africa’s biggest economy is enough to lift stocks.

In what came as a surprise, Nigeria’s economy exited recession in the fourth quarter of 2020, growing 0.11 percent, according to data released by the National Bureau of Statistics on Thursday – after recording two-quarters of negative growth the same year. That, alongside an impressive full-year financial performance of listed companies, was expected to increase investors’ interest in stocks.

But that didn’t come in handy after the equities market, which put over 50 percent returns in the pockets of investors last year to become the best performer globally, continued its bearish run for the fourth trading-day through Friday.

The All-Share Index which serves as a gauge to broad market activities fell 0.06 percent to 40,186.70 points at the close of trading Friday, driven by the decline in bellwether stocks particularly Stanbic, WAPCO and Seplat.

Read Also: Here is why Nigeria’s oil GDP is at the lowest since 2016

Since the start of February 2021, Nigerian equities have continued to perform poorly, no thanks to the upward reversal in interest rates that is making investors rebalance their portfolios into equities.

So far, of the 15 trading days in the month of February, the market has lost out in 13, gaining only 2, according to market data tracked by BusinessDay.

Investors have seen over N1.04 trillion of their wealth wiped out in the last 15 trading days, after the market capitalisation of listed stocks fell to N21.025 trillion on Friday, February 19, from N22.059 trillion recorded at the end of trading in January.

Meanwhile, investors have continued to find comfort in fixed income instruments at the expense of equities, as rates on bonds, OMO and T-Bills trend higher.

Yields on benchmark Federal Government of Nigeria (FGN) bonds rose to the highest levels in eight months at a primary auction this week (Wednesday) as investors sought higher rates amid growing inflation expectations.

The Debt Management Office (DMO) offered N150 billion in 10-year, 15-year and 25-year bonds, which were allotted at marginal rates of 10.25 percent, 11.25 percent and 11.80 percent, respectively.

That compares to similar tenor bonds sold a month ago (in January) allotted at the marginal rates of 7.98 percent, 8.74 percent and 8.95 percent, respectively.

Rates on one-year treasury bills in the last primary market auction, February 10, also climbed 200 basis points to 4 percent from a previous stop rate of 2 percent.