Activity level in Nigeria’s equities market has reached record high in the past seven month, surpassing that of the same period 2023 by almost N1trillion.
The Nigerian Exchange Limited (NGX) recent stock transaction figures show that deals value on the NGX in seven month is N941.62 billion more than same period in 2023.
The total equities transactions in seven months to July was N3.095trillion as against N2.154 trillion in seven months to July 2023.
“The first half of 2024 was a whirlwind for the Nigeria Exchange Group (NGX), with macroeconomic shifts and policy changes stirring up the market.
“The banking sector stole the show, grappling with its recapitalisation saga, which drove much of the market’s ups and downs,” said Lagos-based Comercio Partners research analysts.
“There would be more activities in the equity space, as banks given the ongoing recapitalisation would raise more capital to meet the benchmark,” Comercio Partners research further said in their second half (H2) macroeconomic and markets outlook.
Activity level on the Nigerian bourse peaked since banks intensified their capital raising programmes.
Banks like Fidelity Bank, GTCO, Access Holdings have concluded their capital raising programmes on the Bourse while FCMB Group and Zenith Bank are still in the market for their share sales.
The Central Bank of Nigeria (CBN) on March 28, 2024 announced a two-year bank recapitalisation exercise, which commenced on April 1 and is expected to end on March 31, 2026.
“The exercise would potentially lead to the influx of capital into the domestic economy through offshore capital-raising activities and strengthen the capacity of lenders to support credit creation in the real sector as stronger and more resilient banking entities emerge post-recapitalisation.
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“On the other hand, the exercise would dilute returns for existing shareholders of the banks, could encourage risky behaviour in a bid to raise the required capital.
“Furthermore, the recapitalisation exercise could lead to the concentration of market power for a few banks,” Lagos-based Coronation Research analysts said in their recently released mid-year economic report.
The market’s return this year which stood at +30.76 percent as at July 31 has continued to decrease lately. It stood at +28.35 percent as at Friday August 23.
“The Nigerian stock market began the year strong, with significant gains in January, but the momentum reversed in the following months as the CBN’s hawkish stance and disappointing corporate earnings eroded investor confidence, leading to a largely bearish first half.
“For the remainder of the year, we anticipate a continuation of sideways trading activities in the equities market. Nevertheless, we predict an overall positive outlook for the Nigerian equities market in 2024 as corporate actions and performances and enhanced liquidity in the foreign exchange market boost investor sentiment, impact activity levels and drive growth in the local bourse,” Meristem research analysts said in their 2024 half year outlook.
According to the domestic and foreign portfolio investment (FPI) report of Nigerian Exchange Limited, domestic stock buyers took the lead on the Bourse by almost doubling their transactions to N2.497 trillion in seven months of 2024 as against N1.96trillion they recorded in same period of 2023.
“Banks may meet the new requirement through the following options: issuance of new common shares (by way of public offer, rights issues, or private placements); Mergers and Acquisitions (M&As); and upgrade/downgrade of their respective license category or authorisation,” Coronation Research analysts noted further in the report titled “Tightrope, Balancing Growth”.
In the review period, retail investors also doubled their equity transaction to N1.27trillion in seven months as against N640.44billion in same period of 2023. Domestic institutional investors transactions worth N1.226 trillion in seven of 2024, lower than N1.328trillion they did in seven month to July 2023.
The recapitalisation plan set by the CBN requires minimum capital of N500 billion, N200 billion, and N50 billion for commercial banks with international, national, and regional licenses respectively. The CBN also raised capitalisation baseline for Merchant Banks (N50 billion) and Non-interest Banks (National: N20 billion and Regional: N10 billion).
“After breaking through the historic resistance of 66,121.93 points, the NGX-ASI remains poised for greater heights in 2024, riding on the improved economic outlook for the Nigerian economy, and resilient financial performance of listed corporates.
“In H2-2024, we expect a blend of the expected high base effect in Q3-2024, the potential moderation of interest rates, corporate actions, monetary policy ease in advanced economies to motivate bullish strides at different intervals. The liquidity of the financial system will also play a positive role,” said United Capital analysts in their H2 outlook for equities market.
