Stock market investors gain N13 trillion in one year

Despite rising insecurity and a mix of macroeconomic challenges, the Nigerian equities market soared significantly last year 2023 with investors gaining N13 trillion in nominal terms.

But the gains in equities valuation, in real terms, would have been wiped by the huge haircut to the sharp naira depreciation experienced in the year.

The local currency opened the year at about N448/$ but lost over 50 per cent of its value to close at near N900/$ following the pro-market reforms implemented by the Central Bank of Nigeria (CBN).

The foreign exchange (FX) loss implies that investors in the local bourse are in negative territory in terms of the dollar value of their investments.

The current market capitalisation (N40.9 trillion) is a mere $45.6 billion or over 35 per cent less than $62.4 billion the market was worth this time last year.

On inflation analysis, the market may manage to get away with a positive real return of over 17 per cent. Recall that the headline inflation stood at 28.2 per cent as per November consumer price index (CPI) readings.

Except inflation rate (unlikely) spirals above 30 per cent in the December survey, which is not due for release till mid-January, the real rate of return on stocks would still be around 16 per cent after provisioning for inflation.

The key performance indicator of the NGX: the all-share index (ASI) rallied in 2023, in naira terms, showing third-best in the last decade trailing the 50 per cent rise in 2020 and 47 per cent in 2013 to hit 45.9 per cent.

At the end of transactions in 2023, it closed at 74,773.77 points from 51,251.06 points at which it opened trading in the year.

Similarly, market capitalisation for the period gained N13 trillion to close at N40.918 trillion, from N27.915 trillion.

Capital market analysts noted that it was a surprising and truly exceptional year, especially for the financial markets.

Having started the year at a snail’s pace, Nigerian equities ascended to a 15-year high, marked by the influx of impressive corporate earnings reports by listed firms.

The improved earnings churned out by quoted companies despite the gloomy economy impacted the market positively at a time the rising inflation has left fixed income market instruments in negative real returns.

The strong numbers came majorly from the service-oriented companies on the exchange, cutting across banking, insurance, energy, power, agribusiness, construction, and aviation service companies.

In addition, positive sentiment arising from the smooth handover and President Bola Tinubu’s bold economic policies reinvigorated investors’ confidence in local tickets.

The positive market sentiment was evident across several sectoral indices, including NGX Oil and Gas index with a yearly gain of 125.54 per cent. NGX Banking index rose by 114.9 per cent, while NGX Consumer Goods index appreciated by 90.39 per cent year-on-year (Y/Y).

NGX Insurance index rose by 84.48 per cent, while NGX Industrial Goods index grew by 12.86 per cent Y/Y.