Nigerian Banking Sector Shows Gradual Recovery Following April's 24% Index Decline

Samuel Mobolaji

The Nigerian banking sector is slowly bouncing back after a sharp decline in April, which saw its index drop by 24 per cent to 774 points.

Over the last 14 weeks, signs of a bullish turnaround have emerged, suggesting a gradual correction of the steep losses incurred.

This downturn was largely attributed to the recapitalization policy implemented in April 2024, which negatively impacted investor sentiment towards banking stocks.

As a result, the NGX Banking sector index, monitored by the NGSEBNK10, saw a significant 24 per cent drop from the end of March, as investors took a cautious stance to gauge how banks would adapt to the new regulatory environment.

However, recovery efforts are now underway, with the sector aiming to recoup the points lost in April. As bullish trends begin to surface within specific stocks in the index, there is optimism that the sector could potentially return to its March high of 1,029 points.

Positive price movements are becoming more apparent, with certain large-cap banking stocks showing signs of recovery. This has been accompanied by strong trading volumes, particularly among the FUGAZ stocks, which have significantly boosted the sector’s monthly trading volume in August.

By the end of trading on August 27th, First Bank, UBA, and Zenith Bank collectively recorded a trading volume of 49 million shares, accounting for 73 per cent of the week’s most traded volume.

In August, the NGX Banking sector outperformed many other sectors, trailing only the Oil & Gas and Insurance indexes.

According to the market report for the week ending August 23, 2024, the Oil & Gas index appreciated by 3.54 per cent, followed by the Insurance index, which increased by 1.90 per cent. The Banking sector index saw a modest gain of 0.37 per cent.

Meanwhile, the Consumer Goods and Industrial Goods sectors lagged, with declines of 1.42 per cent and 4.94 per cent, respectively.

The NGX Banking index mirrors the broader all-share index, which also faced a significant drop of up to 6 per cent in April. However, unlike the broader market, the banking index is showing signs of recovery, with investors closely watching for further positive momentum and potential gains in the weeks ahead.