Equities Market Sheds N1.12trn in 2months Amidst Rising Interest Rates

Samuel Mobolaji

Investors’ investment on the Nigerian stock market depreciated by N1.124 trillion between July and August 2024.

In the first two months of the third quarter (Q3), the market experienced notable fluctuations, between downtrend and uptrend movement.

The basic indicators of the Nigerian Exchange, All-Share Index (ASI) lost by 3.48 per cent to close on August 30, 2024, at 96,579.54 basis points, from 100,057.49 points at which it opened trading in July.

Similarly, market capitalisation for the period under review shed N1.124 trillion to close at N55.478 trillion as of August 30, 2024, from N56.602 trillion at which it opened trading for July.

The downward trend in the two months under review is coming on the backdrop of a hike in the Monetary Policy Rate, leading investors to divest into lucrative high yield Treasury Bills (T-Bills) as the Central Bank of Nigeria (CBN) sustained its aggressive moves to tackle rising inflation rate.

Capital market analysts noted investors in the local market continued to take profit-take based on the sentiment, stressing that Nigeria’s capital market is still one of the best performing Exchanges in Africa and World at large.

However, investors’ returns between January and August 2024 stood at N14.56 trillion, while average returns on investment stood at 29.16 per cent Year-till-Date growth. The stock market had gained N15.68 trillion in the first half of (H1) 2024 as investors continued to invest in blue-chip companies.

Capital market analysts stated that the stock market performance eight months of 2024 is on the backdrop of mixed corporate earnings by listed companies, FG’s reforms in the foreign exchange market, among other factors.

Speaking on market performance in last two months, the vice president, Highcap Securities Limited, Mr. David Adnori stated that, investors are trading based on sentiment.

He stated that the emergence of President Bola Tinubu further energised the stock market since market participants have hope in his ability to rejig the economy and implement economy-friendly policies.

Adonri, however, was optimistic that the stock may maintained its positive momentum in H2 2024, on the backdrop of banking sector recapitalisation and expected H1 2024 corporate earnings by most especially the banks listed on the Exchange.

Amid hike in Monetary Policy Rate to 26.75 per cent, analysts stated that its impact has created sentiment trading among investors who see fixed-income market as alternative investment opportunity to hedge against double-digit inflation.

An Investment Banker & Stockbroker, Mr. Tajudeen Olayinka stated that the N14.56 trillion market capitalisation gain in eight months of 2024 tells us the presence of huge liquid funds in the hands of institutional investors who currently dominate activities in the stock market.

“It also holds the fact that the future is brighter for some of the listed companies, hence, investors are positioning their portfolios for that brighter future. This is also the reason the market remains resilient in spite of a high-interest rate regime,” he said.

The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said: “August 2024 was a month of mixed outcomes for the Nigerian stock market, influenced by sector-specific performances, macroeconomic trends, and broader market dynamics. While the industrial goods sector and major stocks like Dangote Cement led to a market decline, certain equities showed substantial gains.”

He added that, “the macroeconomic indicators, including GDP growth and inflation trends, reflect a complex economic environment. Investors should remain vigilant, considering both market indicators and broader economic conditions when making investment decisions. Sector rotation and a focus on undervalued stocks may offer potential benefits as the market adjusts and evolves.”