In the first two months of 2024, the Nigerian Exchange (NGX) has emerged as the leading stock exchange in Africa, boasting an impressive 33.70% return on investments for investors. This accolade, disclosed in a statement from NGX on Tuesday, positions the local bourse ahead of notable counterparts such as the Johannesburg Stock Exchange, the Egyptian Exchange (EGX 30) Index, and The Ghana Stock Exchange.
The NGX’s stellar performance began in January when it was recognized as the world’s best-performing stock market during the initial three weeks of the year, surpassing even Argentina, which secured the second spot. Notably, the market capitalization witnessed a substantial uptick of N13.79 trillion between January and February, soaring from N40.917 trillion at the start of the year to N54.707 trillion by the close of February.
Despite prevailing challenges, including heightened insecurity, inflation, and foreign exchange fluctuations, the NGX’s All-Share Index closed February at 99,980.30 points, reflecting a remarkable increase of 33.71% from the 74,773.77 points recorded at the year’s commencement. Although the market experienced a bullish trend in January, the momentum slowed in February as bearish trends emerged.
Analysts attribute the market’s slowdown to lackluster corporate earnings and the allure of better yields in the fixed-income market. Tajudeen Olayinka, CEO of Wyoming Capital and Partners, noted that the stock market was undergoing a repricing phase due to an interest rate hike and consistent issuance of one-year Treasury bills with a high effective yield of over 20%. Consequently, there is a discernible shift towards the fixed-income market, according to Olayinka.
Rotimi Olubi, Managing Director of ARM Securities Limited, emphasized the impact of high fixed-income yields, driving investors away from equities. He anticipates this trend to persist in the short term, particularly after the recent 400 basis points hike in interest rates by the Monetary Policy Committee of the Central Bank of Nigeria, currently standing at 22.75%.
Despite the challenges, experts see this as an opportune time for investors to enter the equities market at a more affordable price, positioning themselves to capitalize on anticipated dividend payments in the coming months.
