Nigeria: Stock Market Poised for Recovery After August Losses

In August 2024, investors experienced a loss of N36 billion as the Nigerian stock market endured a bearish phase during the first three weeks of the month. The Nigerian Exchange Limited (NGX) saw its major market indicator, the All Share Index (ASI), decline by 1.2% month-on-month (MoM), closing at 96,579.54 points compared to 97,774.22 points in July 2024.

The market capitalization, reflecting the total value of investors’ assets on the Exchange, also dipped slightly, closing August at N55.477 trillion, down from N55.513 trillion in the previous month.

An analysis of the equities market reveals mixed performance across various indices. The NGX Mainboard Index ended the month higher at 4,790.05 points, up from 4,744.96 points in July. However, the NGX 30 Index declined to 3,589.85 points from 3,614.26 points, while the Banking Index fell to 857.21 points from 801.43 points.

Despite the overall decline in August, the market showed signs of recovery in the final week. The All-Share Index posted a 0.6% week-on-week (WoW) gain, closing at 96,580.01 points. This resurgence was largely driven by strong investor interest in OANDO, which surged by 6.7% following its acquisition of the Nigerian Agip Oil Company (NAOC). Additionally, BUA Foods saw a 5.7% increase due to bargain hunting activities. Consequently, the Year-to-Date (YTD) returns stood at 29.2%.

Sectoral performance for the week was broadly positive, with the Oil and Gas Index leading the charge, up by 8.5%. The Insurance Index rose by 5.8%, Consumer Goods by 3.5%, Banking by 2.0%, and Industrial Goods by 0.1%.

Commenting on the market’s outlook, analysts at Cordros Research noted: “In the near term, we believe the absence of a significant catalyst may lead to a cautious market sentiment, potentially driving negative performances. However, in the medium term, investor sentiment is likely to be influenced by macroeconomic developments and movements in the fixed-income market.”

Meanwhile, analysts at InvestData Consulting Limited provided a more nuanced perspective, stating: “We anticipate mixed sentiment as August wraps up with losses driven by profit-taking and sector rotation. The market remains in an oversold region, but portfolio repositioning continues as investors capitalize on pullbacks to invest in value stocks. Despite the ongoing volatility, these pullbacks could strengthen the market’s upside potential. Investors should therefore consider price corrections and global and domestic trends when making decisions.”