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Nigeria stocks’ gain nears N1trn mark in 2021

Nigeria’s stock market weakens ahead of Christmas holiday

The year 2021 has indeed been a momentous one for the Nigerian stock market, but many stocks far outperformed the Nigerian Exchange Limited (NGX) benchmark performance indicator, thereby aiding the market to nearly N1 trillion gain.

Though stock dealers have two trading days to end year 2021, but ‘Santa’s no-shows’ on Custom Street no doubt tends to precede rough trading periods lately.

The market, which kicked off the year 2021 with some of the bullish forces from 2020, had gained 5.3 percent in January 2021, but subsequently reversed as various drags, particularly the fixed income (FI) yield reversal, weighed on sentiments.

Defying expectations, Nigeria’s capital markets look good to end this year 2021 in positive territory with record positive return of +4.94 percent as of December 24, despite the fears over omicron variant taking heavy toll on stock investors’ risk appetites.

Year-to-date (YtD), the value of listed equities on the Nigerian Exchange has risen by about N997 billion – nearing a N1 trillion market.

Read Also:Here’s how stock market performed in week ended Dec. 24

Stocks that fuelled market gain YtD

Some of the stocks that exceeded 20 percent return include: Champion Breweries (+183.7%), Custodian Investment (+33.3%), Ecobank Transnational (+48.3%), FBN Holdings (+60.8%), Guinness (+105.3%), Honeywell Flourmills (+187.5%), Julius Berger (+25.6%), and Livestock Feeds (+46.8%).

Others are: AXA Mansard (+112.4%), Morison (+270.6%), NAHCO (+47.8%), Oando (+24.3%), Okomu Oil (+56%), Presco (+23.7%), PZ (+26.4%), Seplat Energy (+61.6%), TotalEnergies (+70.7%), UACN (+31%), United Capital (+110.2%), University Press (+129.7%), and Vitafoam (+188.5%).

Analysts’ views

“The equity market in 2021 rode on the appreciation of the Oil & Gas Index on the back of the sustained increase in oil prices. The short-term outlook for the global oil market is challenged with the spread of the COVID-19 Omicron variant. This is expected to negatively impact the performance of the Oil & Gas segment of the NGX.

“At the firm level, many large-cap companies listed on the exchange are reporting record performance in their 2021-9M reports, which will spill into their full-year performance and eventual dividend payment. Hence, it will drive positive sentiment towards the equity market in 2022,” FSDH Research analysts say in their macroeconomic review and outlook for Nigeria.

According to the FSDH Research analysts, “Investors’ participation in the equity market picked up pace in September and November 2021; however, still lower compared with the previous year. Though foreign participation is picking up (their apathy towards Nigeria’s equity market remains), it is significantly lower than domestic participation.

“The equity market continues to ride on the boost in liquidity in the system and associated decline in yields. This sufficiently placed the equity market on a gaining side in 2021.

“Going into 2022, we anticipate a further liquidity boost in 2022’Q1 due to more maturities coming in from segments of the fixed income market. Hence, the equity market will continue on its positive glide.”

According to Luke Ofojebe-led team of research analysts at Lagos-based Vetiva in their recent outlook, “For 2022, we maintain a cautious outlook as we see the Nigerian economy running scared amid several intimidating factors that lie ahead. Firstly, we see the possibility of higher borrowing costs amid pre-election worries and the expectation of a hawkish stance from central banks in advanced economies.

“This, we believe, may result in slower capex rollouts by corporates. Also, with inflationary pressures likely to remain for most of the year, profitability margins may be further weakened, and the situation could be much worse should the government discontinue fuel subsidies or raise the pump price of PMS in the second half.

“For the oil and gas sector, we expect to see recoveries in crude output, riding on softer OPEC cuts and infrequent infrastructure downtime. Also, our view that oil prices would remain strong next year, amid increasing global demand and supply disruptions, should translate to increased revenue for oil producing companies.”

Indicators still show more positives as year-end nears

The NGX All Share Index (ASI), which opened the year in review at 40,270.72 points, had risen to 42,262.85 points as of December 24, 2021. Also, the equities market capitalisation that opened the review year at N21.063 trillion had risen to N22.060 trillion as of December 24, 2021. Bonds Market Capitalisation has risen from N17.501 trillion as of December 2020 to N19.596 trillion as of December 24, 2021.

Market has largely remained resilient amid uncertainty

While the stock markets saw several swings and steep losses, it however largely remained resilient amid uncertainty driven by the COVID-19 pandemic. Leveraging technology, the nation’s capital market saw more remote trading activities as dealers effectively navigated the challenges brought forth by the pandemic.

The reopening of businesses in the early part of the year as well as normalisation of economic activities and Nigeria’s revenue-diversification drive elicited positive sentiments around equities and bonds.

The big deals in 2021 and expected in 2022

MTN Nigeria Public Offer was lauded by investors, while Flour Mills and Honeywell Flour Mills business combination signposts the potentials of the FMCG’ sector. BUA Group is finalising plans to list its Foods Business on the Exchange, another listing expected in 2022 that will drive liquidity in the FCMG sector of the Bourse.

Demutualised exchange

The Exchange completed its demutualisation process in 2021. A new non-operating holding company, the Nigerian Exchange Group plc (NGX Group) was created with three operating subsidiaries – Nigerian Exchange Limited (NGX), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent securities regulator, and NGX Real Estate Limited (NGX RELCO), the real estate company. This marked a critical and historic milestone for the Exchange as it enabled it to execute on its strategic vision to be Africa’s premier exchange hub.

More domestic investors return to equities

As more domestic investors key into the market, the NGX must aggressively pursue cutting-edge products and services.

In 10 months to October 31, not less than N1.544 trillion worth of Nigeria’s listed stocks were exchanged by dealers on the Bourse, as against N1.581 trillion recorded in the same period in 2020.

Out of the total amount of equities traded in the review period, domestic investors exchanged equities worth N1.215 trillion, representing 78.66 percent of the total. Domestic investors had the same in 2020 exchanged stocks worth N989.12 billion.