Market closes flat amidst weight shedding in 16 stocks
Stockbrokers at the floor of the Nigerian Stock Market

Okey Onyenweaku

The Nigerian economy is in dire straits. About 40% (80-100m) of Nigerians are wallowing in extreme poverty; food production is expected to decline given fertilizer shortages due to the Russia/Ukranian war and has also not fully recovered from the devastating impact of Covid-19. At the same time, there is the crisis of insecurity which has hampered agricultural activities and is taking a heavy toll on Nigeria’s food security; food inflation according to NBS stood at about 17.2%; over N6trillion deficit is tugging at the N17trillion budget for 2022 and the bulk of debt servicing will also come from that stack of funds while the value of the naira keeps declining and the country remains generally unproductive with even unemployment and underemployment rates standing at 33% and 22% respectively and head line inflation remains high at about 16%. More worrisome is the fact that the Country’s total direct remittances dropped by $119.4m (48%) to $130.12m as of January 2022 from $249.52m as of December 2021 even as the government targets total debt stock of about N46.63trn which it services with about 95% of its revenue. Equally problematic is the increasing tenor of political instability in the Country.

This scary scenario does not favour equities market growth as market participants are wont to be lethargic about their investments. But that is far from being the case in recent times.

Of the markets all over the world, NGX has remained one of the best performing. For instance, the equities market sustained its bullish disposition into the outgoing week, gaining 0.34% per cent as the All share Index and market capitalization rose from 52,917.76points on May 12, 2022 to close at 53,098.46 points as at May13, 2022. Similarly, market capitalization also rose 0.34 per cent from N28,528trn to N28,625trn.


Indeed, the equities market has maintained a bullish disposition since the beginning of this year 2022. Details show that the All share Index has surged by 23% from 43,026.23 points on January 4, 2022 to close yesterday Wednesday May 11, 2022 at 53,098.43 points. Similarly, the market gained 23% (N5.440trn) as market capitalization climbed from NN23.183trillion on January 4, 2022 to N28.6trillion on May 13, 2022.The sub-sectors have also gained significantly in the last five months from January to May 2022. For instance; NGX Main Board has gained 23 per cent this year, NGX 30 appreciated 17.46 per cent, NGX Premium Index jumped 26.17 per cent, NGXBNK moved up 6 per cent and NGXPension added 20 per cent. Other sectors equally gained significantly. Assuredly, the capital market platforms have become a beehive again as activities are very high.

And the Nigerian stock market has continued to be upbeat since the beginning of the year. Reports show it has emerged the best performing market in Africa and third in the world, as the NGX’s All Share Index (ASI) hit 13-year high, crossing the 52,000 mark for the first time since 2008.

At that time the market capitalization peaked at about 13.1trillion and the All share Index gained a giddy height of 66,551.84 basis points on March 5, 2008. Most of the equities grew bullish and the Nigerian Capital Market was thrown into frenzy.

Whereas this is no mean performance overall, the reality however is that investors are still jittery and do not seem to have convincing confidence in the market in the short to long run given the uncertainty in the overarching national political atmosphere.

On January 22, 2020 the market capitalization had only peaked at N15.173 trillion.

Market analysts have insisted that the Nigerian economy, though growing, has not shown enough capacity at 3.9% in Q4 2021 to ensure confidence in investors.

As a result they also reckon that the recent bullish market surge is not sustainable given the harsh operating environment. However, the market has made some gains, analysts believe due to movements in the heavy stocks caused by impressive first quarter results.


Commenting on the market rally, Mr. CHIDI AJAEGBU, founder / Chief Executive Officer of Heritage Capital Markets told business Hallmark that the seemingly bullish trend in the equities market resulted from the strong and impressive first quarter performances of consumer goods stocks.

‘’I can’t conclusively say that the market is booming. But let me explain what I think is happening to the best of my knowledge. I think if you check carefully, the rally that is taking place in the market is driven by some specific stocks especially the consumer goods sector by the likes of Cadbury and Unilever, as well as the brewery sector. These are on the back of their strong earnings; that is the first quarter earnings.

‘’ I am not sure that rally is sustainable. For example, Cadbury is paying 50kobo dividend after a long time so that will excite investors and project a strong outlook for future years. For Cadbury too, I am not sure its value will go back to the pre-rally level of N9.00 per share. It will likely remain at the threshold of N12.00-N13.00.

‘’Nigerian Breweries is not too different. As I speak to you now, almost nobody is bidding for it, because I am in the market and know this. Nobody is also bidding for Champion Breweries. This to me indicates that the rally within that part of the market is already waning, meaning that it has attained a certain level of threshold of pricing for now and maybe the next time we should expect some form of movement in the Brewery sector will be after the results of the half year.

‘’Okomu Oil and Presco which are into palm produce expect some income in hard currency of course even if they don’t make profit in the exports the translation gains in naira will impact their bottom lines. That is also part the reasons people are interested in that sector. There is also a rumour that one of them might be doing a scrip issue in addition to cash dividends. And for MTN there are a lot great things happening for MTN.

The company is getting a banking license and its subscriber base continues to grow in spite of the constraints foisted on them by the regulators on the issue of having to link your number to NIN. MTN has strategized in a way that could significantly drive their revenue stream in the near to medium terms’’.

Mr. Ajaegbu who was Past President of the Institute of Chartered Accountants of Nigeria(ICAN), warned that recent market rally was not sustainable given the uncertainty in the operating environment.

He however, advised that investors should diversify and balance their investment portfolio to guard against a shock from one sector affecting their entire investment.

Sharing in the views of Ajaegbu, Chief Executive Officer of High Cap Securities limited, Mr. David Adonri said that about 90 per cent of the recent rally in the market was induced by the impressive results of the High cap stocks.

Adonri explained that any movement in those heavy stocks usually impacts the market depending on whether the movement is positive or negative.

According to him, we are in a seller’s market because sooner than later the market would enter a correction mood.

‘’About 90 per cent of movement in the market is because of activities in those stocks. About ten per cent is just the palpable environment due the price of crude oil that is still up beat. That is also impacting positively on the market. We are in a sellers’ market because sooner or later when those other negative factors start hitting the market like the build up to 2023 election, that the political rift, the insecurity and the deterioration in the economies of the industrialised countries.

‘’So when those conditions start hitting our market there will be correction. It is putting it in a sellers’ market. Whoever wants to take profit should take it now because sooner or later there will be correction.

The market reacts to changes in the domestic and external factors. So no internal market has the full capacity really to determine what happens in third market except if it is an isolated economy, or a closed economy’’ said Adonri

For the analysts at Cordros, “Given that the Q1’22 earnings season has run its course and the upward repricing of cyclical stocks that ensued, we expect a subdued market performance in the week ahead. “The bears will likely dominate the market performance, as investors cash out on the gains across bellwether stocks over the past two weeks.”

“Given the positive run observed in the last few weeks, we envisage that investors might start to take profit during the early part of next week. However, we expect bargain hunting activities to pick up towards the end of the week.” Analysts at Parthian Securities, also said.

Experts believe there will not be any magic in the Nigerian economy in the short run to sustain a bullish market given the Nigeria is not able to harness the opportunities offered by the rice in the price of crude which hovers between $100 and $115 pb; the western economies are also increasing rates by 50points especially to USA. These would, they reveal reverse capital inflow back to the developed economies and deplete investment in Nigeria.

In fact, a few have hinged their fears on political uncertainty given the political atmosphere and with the desperation in the contenders for political posts in the 2023 election.

Supporting the tough conditions of the economy, Economist Opeyemi Agbaje, CEO, Resources and Trust Company ltd recently said,

‘’First of all you mention a N6trillion to N7trillion deficit in the budget and we are adding N4trn to fund subsidy, that means that the debt will rise. Currently we service our existing debt depending on your source with about 80 to 95% of our revenue. Essentially we are borrowing to service existing debt, borrowing to pay subsidy, borrowing to pay salaries and over heads with a tiny portion of it to build infrastructure. On the GDP side the economy is barely growing, we have 4 to 3 per cent growth in the last two quarters of 2021 but anybody who understands economy, it is because of what economists call base effect, which means that we calculate this GDP year on year. You know we had a recession in 2021, so the growth is now -1%. So we are barely struggling to grow.’’

Market performance in the last 20 years

+65% in 2003;

+18.5%in 2004;

+1.01% in 2005;

+37.80% in 2006

+74.73% in 2007.

-45.77% in 2008

-33.80% in 2009

+18.50% in 2010.

-17% in 2011,

– 35.4% in 2012,

+47.19% in 2013,

-16.14% in 2014

-17.36% in 2015

-6.% in 2016

+42.30 % in 2017,

-17.81% in 2018

-14.6% in 2019

+50.03% in 2020

+6.07% in 2021

+23% in May 2022






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