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Nigeria’s stock market ends year 2021 with positive return of 6.7%

Market sees first dip after recent rally

Nigeria’s equities market ended the year 2021 with an impressive positive return of 6.7 percent amid a remarkable rally on Friday, December 31 (+2.16percent) or N471billion. Last-minute bargain on the Nigerian Bourse helped the value of listed stocks to rise by N1.23trillion in 2021.

According to Lizzie Kings-Wali, Chief Executive Officer of Blackstone Capital Limited; “2021 was a roller-coaster year for equities, with eight months of positive returns and four-month of the bearish season.”.

With the market closing the year with a 6.7percent gain, consolidating on the strong recovery in stock prices in 2020, “the sentiment for Nigerian equities is increasing upbeat.”
” Interestingly, market liquidity and the rally have been driven by domestic institutional and retail investors, thus reinforcing the potential of Nigerian investors in stabilizing and growing the market.

“Notwithstanding the imminent introduction of capital gain tax, political risks, and a few other risks to equity market rally in 2022, Nigerian stocks are attractive and should remain resilient in the new year. Though likely modest rise in the interest rate environment may undermine funds flow to equities in the new year, positive earnings outlook across most large-cap value stocks should reinforce the investment opportunities in Nigerian stocks,” she said.

The Nigerian Exchange Limited (NGX) All-Share Index (ASI) moved from Thursday’s low of 41,813.27 points to 42, 716.44 points on Friday while the value of listed stocks on the Bourse rose from N21.825trillion to N22.296trillion.

The Nigerian Exchange Limited (NGX) All Share Index (ASI) had opened the year 2021 at 40,270.72 points. Also, the equities market capitalisation opened the review year 2021 at N21.063trillion.

Read also: Trends that defined real estate market segments in 2021

Speaking on the market, Isaac Olorungbon, Chief Executive of Deep Trust and Investments Limited, expressed optimism on the capital market, even so, he reckon some risk factors that may undermine the rally in both equities and fixed income markets.

“2022 is a pre-election year, and investors, especially foreign portfolio managers may be cautious in allocating funds to Nigerian assets, given routine uncertainties that tend to dominate investors’ sentiment in such environment. Whilst consensus suggests oil price may remain relatively strong through 2022, thus giving some hope on the prospect of foreign currency receipt and ultimately Naira stability, the likely elevation of political risk may trigger macro and market risks,” he noted.

“That said, Nigerian equities market remains very attractive from all perspectives. Notably, the MSCI Investable Market Index is trading at barely 7.0x earnings multiple and an impressive 6.8percent dividend yield; these valuations are at a significant discount to frontier market peer average of 15.0x price-to-earnings multiple and 2.6percent dividend yield. Interestingly, the MSCI Nigeria Investable Market Index, though consisting of eighteen stocks, represents over 90percent of the free-float adjusted market capitalization of the Nigerian Exchange, hence a good reflection of the overall market.

“Interestingly, companies such as Dangote Cement, MTN Nigeria, GTBank, Nestle, and Zenith Bank, which are our top picks, are resilient bellwethers with the history of sustaining earnings growth through political cycles. Thus, we remain upbeat on the prospect of the Nigerian market in 2022, as our cautious optimism reinforces our outlook of another positive return for Nigerian equity investors in the new year,” Olorungbon said.

Equity research analysts at Lagos-based Vetiva said in their December 31 note to investors that, “The equity market witnessed a largely mixed performance despite the impressive and resilient earnings posted across various sectors. The bearish sentiment in the market this year could be attributed to higher interest rates in the fixed income space compared to the prior year, increased participation in alternative asset classes, and reduced foreign portfolio investments due to the foreign exchange challenges.

“We expect to see similar market sentiments filter into the first quarter of 2022, given the lack of suitable catalysts to boost activity,” the analysts noted.