The Nigerian stock market fell by N674.53 billion during trading this week amid post-election uncertainties that have triggered concerns dampening investors’ confidence.
The drop in the capital market has been attributed to concerns about a plan to install an interim government following the disputed outcome of the just concluded presidential election. Market leaders believe that the Nigerian Exchange Limited (NGX) was reacting to that revelation made by the Department of State Services (DSS) late last month.
Against this backdrop, market capitalization dropped from N29.54 trillion that the market opened with on Monday, April 3, to N28.87 trillion on Thursday, April 6.
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In its stock market report, the ICIR noted the impact of the Easter holiday, which cut trading week to four days ending Thursday, as well as the drop in Airtel’s shares – serving as factors in the entire market’s drop.
Movement of stocks showed that the NGX All-Share Index depreciated by 2.28 per cent to close the week at 52,994.13 basis points (bps), leaving the year-to-date return to decline to 3.40 per cent from 7.04 per cent last week.
This caused the stock market to drop further in value as investors also reacted to the publications of economic data and dividend announcement by companies.
Part of what also played out in the market was that investors have begun to reposition ahead of the first quarter earnings season based on the current price levels that have been perceived to be an attractive point of entry.
However, the stock market trended downward as a result of sell-pressure in some of the mid and large capitalized stocks.
Across the sectors, performance was largely negative, except for the insurance sector which gained 2.19 per cent to close at 181.40bps, while all other sub-sector indices dropped in volume.
The industrial index led the pack, dropping by 3.65 per cent to close at 2,455.43bps; banking index saw a 1.05 per cent loss to 448.23bps; consumer goods index declined by 0.62 per cent to 698.37bps; and oil and gas index fell by 0.11 per cent to 510.25bps.
The share price of Airtel Africa, the most capitalized stock on the Exchange, dropped by 10 per cent to close at N1,331.10 from N1,479.00 it opened on April 3.
In the review week, a total turnover of 1.054 billion shares worth N10.05 billion in 16,155 deals was traded by investors, in contrast to a total of 2.071 billion shares valued at N17.562 billion that exchanged hands last week in 17,917 deals.
While 37 stocks depreciated in price higher than 30 in the previous week, 16 stocks appreciated in price during the week lower than 37 stocks in the previous week.
In a chart with the ICIR, the national chairman of the Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, said the political uncertainty in the country might have contributed to the capital market’s record four-day straight decline in the first week of the new month.
“Let’s know the direction the economy will be moving that will give us the direction the market will head for now. The coast is not clear because the outgoing government is just standing still even when their presence has not even helped the market,” Okezie said.
David Adonri, chief executive officer, Highcap Securities Limited, David Adonri, is another analyst who believes the drop in the capital market has much to do with Nigeria’s current political situation.
He told The ICIR: “The cumulative effect of all these is that migration of financial assets from equities to the safety of debt in this quarter may be inevitable,” admitting that the stock market might also be reacting to rising inflation, hike in interest rate and low capital inflow.
“Investors are also gearing up for the anticipated negative impact of the currency confiscation exercise on fundamentals of companies when Q1 (first quarter) results start hitting the market this month,” he said.
However, Abel Ezekiel, an investment and portfolio analyst, expressed a different view, saying that “the rumor” about an interim government couldn’t have impacted the capital market.
“The drop in the market value this week was as a result of the drop in the share price of Airtel Africa,” he told ICIR.
“What we saw this week is a corrective step, a kind of investors’ strategy to take dividends, and not because of the color of the rumor of an interim government.”