Market News

BY Temitope Aina

The Nigerian equity market gained 64.11 per cent between July 2023 and June 2024, closing at 100,057.49 points, according to the recently published Fund Manager’s Report on the Nigerian Exchange Limited.

The performance was supported by renewed participation from foreign portfolio and domestic investors, alongside strong corporate earnings.

According to the report, the Industrial Goods Index recorded the highest return of 88.43 per cent, driven by the share price movement of Dangote Cement. The Oil and Gas Index followed with a return of 82.95 per cent, buoyed by activity in Seplat, TotalEnergies and Oando.

The FMCG Index appreciated by 75.84 per cent due to buying interest in BUA Foods, Dangote Sugar, Flour Mills and Honeywell, following the acquisition of NASCON.

The report noted that the banking sector index advanced by 20.46 per cent, amid regulatory actions on recapitalisation, net open position, cash reserve ratio, asymmetry corridor, and monetary policy rate. Insurance stocks returned 38.42 per cent during the period, led by demand in AIICO and Mansard.

Meanwhile, inflation rose to 28.92 per cent in December 2023 from 21.82 per cent in January of the same year. The rate further increased to 34.19 per cent in June 2024, largely due to continued naira devaluation, food supply disruptions, the removal of the petrol subsidy, and infrastructure issues in transportation and storage.

In response, the Central Bank of Nigeria raised its benchmark interest rate to 22.75 per cent in February 2024, increased it to 24.75 per cent in March, and further to 26.25 per cent in May 2024. Other monetary parameters, including the cash reserve ratio and asymmetry corridor, were adjusted to limit money supply and attract foreign inflows.

On the macroeconomic front, Nigeria’s economy recorded a real GDP growth of 2.74 per cent in 2023, below the 3.75 per cent target in the government’s expenditure framework. GDP growth in the second half of 2023 stood at 3.00 per cent, while the first half of 2024 recorded 3.08 per cent growth, supported by increased government spending, consumer demand and modest exports.

The Fund Manager’s Report attributed the slow growth to inflation, high interest rates, and the impact of external factors, including global conflicts and foreign exchange challenges.

The report added that at the global level, economic growth fell to 3.0 per cent in 2023 from 3.5 per cent in 2022. The United States recorded 3.1 per cent growth, while China faced slower expansion due to weak domestic demand and low foreign investment. Africa’s economy also slowed to 3.2 per cent in 2023 from 4.1 per cent in 2022.

The fixed-income market experienced a rise in nominal yields, including a jump in 364-day Treasury Bill rates from 5.94 per cent to 20.68 per cent. However, rising inflation eroded real returns.

The fund manager, Ajediran Omololu, stated that the fund portfolio will be adjusted to target growth sectors in the new financial year in light of high inflation, interest rates and exchange rate challenges.