In year 2022, local and foreign investors in Nigeria’s equities market traded stocks worth N2.324trillion, a reasonable increase by N425billion or 22.4percent compared to N1.899trillion worth of equities they traded in 2021.
This record value of equities trade in 2022 came despite tightening measures by the Central Bank of Nigeria (CBN) amid surging inflation and political uncertainty which weighed on investors’ outlook for the country.
At the NGX 2022 market recap and 2023 outlook, Temi Popoola, Chief Executive Officer, NGX noted that market participation was heavily skewed to the domestic investors.
Recent data on domestic and foreign portfolio participation in equity trading show domestic investors remained king in the market in 2022, accounting for equities trade worth N1.945trillion or 83.68percent.
While domestic retail investors traded equities worth N642.73billion in 2022, their institutional counterparts were responsible for equities deals worth N1.302trillion.
Foreign investors traded N379.23billion worth of equities or 16.32percent of the total value in 2022. Out of the amount traded by the foreigners, N195.76billion was foreign inflow while N183.47billion was foreign outflow.
Vetiva research analysts noted in their 2023 outlook titled “A walk in the dark” that in 2022, “rising inflation, caused by warring tensions in Eastern Europe, dominated the global scene in 2022, as the Russia-Ukraine crisis dealt a big blow to food and fuel supply chains, taking inflation to multi-year highs across the globe. Nigeria was not left out”.
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“Sentiment was predominately bearish across other sectors, as concerns over the health of the economy in a pre-election year unnerved investors. Furthermore, a pivot to the fixed income space due to rate hikes from the CBN, weighed on market participation, as investors took a risk-off stance towards the equity market,” Vetiva research analysts said.
“Political stability post-2022 and more market-oriented policies of the new administration are expected to drive a steady recovery in portfolio inflows over the medium term,” according to Ayo Ebo, chairman, research and technical of Chartered Institute of Stockbrokers (CIS) said during a conversation organised by Chartered Institute of Stockbrokers.
At N607.45billion, the value of equities traded in May 2022 was the highest last year, followed by January 2022 (N323.38billion), and April 2022 (N205.88billion). In February 2022, investors exchanged stocks worth N183.56billion, in March same year it was N185.26billion, while in June stocks worth N156.52billion were exchanged.
In July 2022, stocks worth N101.18billion were traded on the Nigeria Exchange Limited. In August same year, it was N123.97billion; September (N81.90billion), October (N110.09billion), November (N104.38billion), and December (N140.70billion).
“The Lagos bourse delivered a positive return of +20percent in 2022, thanks to a stellar half year (H1) 2022 and positive performance in the final two months of the year. The NGX’s 2022 performance compares with returns of -0.9percent and -11.9percent for Johannesburg (Joburg – JALSH), and Nairobi (NSE 20) stock exchanges respectively.
“With respect to market activity, the investment apathy by the offshore community continued. As such, activity was dominated by domestic investors. Moving forward, we anticipate a muted performance from the NGX in first-quarter (Q1) 2023 as focus turns to the general elections in February.
However, given our expectation of a recovery in second half (H2) 2023, we continue to anticipate that the NGX will provide double-digit returns in 2023,” according to FBNQuest Capital research analysts in their January 4 note.
“In 2022, the equities market performance was evidenced by the 19.98 percent increase in the NGX All-Share Index, which rose from 40270.72 to 51,251.06 just as the market capitalisation also closed at a high of N27.92trillion, up from N21.06trillion the previous year. The total turnover of trades in 2022 improved by 27percent from N916billion to N1.16trillion year-on-year from 2021.
“Market participation was heavily skewed to the domestic investors. The Fixed Income market saw a slight uptick in turnover to N3.89billion in 2022 from N3.53billion recorded in 2021. This represents a 10.20percent year-on-year (YoY) increase.
“The Exchange Traded Funds market capitalisation increased from N7.35billion in 2021 to N8.42billion in 2022, representing a 14.56percent increase in the market capitalisation. Stanbic IBTC ETF 30 which tracks the performance of NGX 30 index was the best performing ETF in 2022, having begun the year at N68.5 and closed at N245, reflective of 257.66percent returns. ETF transactions fell from N34.22billion in 2021 to N211.02million in 2022. This represents a 99.38percent decline in ETF turnover,” Popoola said.
Over a sixteen (16) year period, domestic transactions decreased by 45.30percent from N3.556trillion in 2007 to N1.945trillion in 2022 while foreign transactions also decreased by 38.47percent from N616billion to N379billion over the same period.
Total domestic transactions accounted for about 84percent of the total transactions carried out in 2022, whilst foreign transactions accounted for about 16percent of the total transactions in the same period.
This year 2023, the NGX aims to do more on trading where it improves data dissemination to attract a larger investor base, especially from the retail side. “We will be using listings as a vehicle for meeting strategic aspirations as the new dispensation comes in through increased advocacy and engagements.
“NGX sees sustainability as not just important but also a profitable frontier of its business and work is ongoing on developing a framework for certifications in carbon credits trading, pending regulatory approval. On the capital market’s digital transformation, the Exchange is working on USSD launch in collaboration with Telcos and Banks; unlocking the African Capital markets via payment integration with Afreximbank’s Pan African Payment Settlement System,” the NGX CEO said during the 2022 market recap and 2023 outlook.
The Nigerian equities market started this year with an impressive return of 3.88percent in January 2023, but is still underperforming the rate of inflation. Looking at the outlook for the Nigerian equities market pre and post-election, Financial Derivatives Company analysts said the Lagos Business School (LBS) Executive Breakfast Session that in the pre-election period, “equities market performance will be choppy.”
“Investors are expected to trade cautiously. Institutional investors expected to flock to equities due to declining NTB rates. Resilient corporate results will enhance investor confidence in equities. Panicky investors will exit the equities market in the short term due to election jitters”.
On the outlook for equities market post-election, Financial Derivatives analysts said, there will be “portfolio rebalancing across asset classes to favour equities. Investors are expected to position for opportunities in sectors/stocks that will benefit from favourable political reforms. Investors will position for attractive dividend yields. Investors will choose between attractive dividends and price depreciations. The stock market will gain in excess of 2-3percent after the election results are announced”.
