The Nigerian stock market reacted positively to the inauguration of President Bola Tinubu, as the benchmark index closed 5.23 per cent stronger – the biggest single-day gain since 12 November 2020 – to settle at 55,745.74 points.
The Nigeria stock market benchmark performance indicators – the All-Share Index (ASI) and its equities Market Capitalisation – rose by 5.23 per cent or N1.51 trillion, its highest daily gain in two years, from preceding trading day’s lows of 52,973.88 points and N28.845 trillion respectively to 55,745.74 points and N30.353 trillion.
In 9,916 deals, investors exchanged 1,078,230,806 shares valued at N15.799 billion. The stock market’s year-to-date (YtD) positive return also increased to 8.77percent. Access Corporation, FBN Holdings, Transcorp, UBA, and GTCO were the most traded stocks as stocks like Nigerian Breweries, Jaiz Bank, FCMB Group, and Eterna were topmost on the buy-side of the Nigerian Bourse.
Nigerian Breweries rose most, from N38.50 to N42.35, adding N3.85 or 10 per cent, while Eterna moved from N7 to N7.70, up by 70 kobo or 10 per cent. FCMB Group rallied from N4.20 to N4.62, adding 42 kobo or 10 percent.
Analysts at Nigeria’s equities market are optimistic that the pro-market policy direction of the President Bola Tinubu-led new administration will bring some cheer to equity investors.
President Tinubu had on Monday highlighted the need for a unified exchange rate and a reduction in interest rates to drive up investment in the country. Barely hours after Tinubu said “fuel subsidy is gone”, long queues resurfaced across petrol stations in major cities as about 98 percent of petrol stations shut their pumps.
CardinalStone research analysts in their May 30 note said, “We expect the early communication of the mostly pro-market policy direction of the new administration to bring some cheer to equity investors. Notably, potential improvement in FX market liquidity and removal of fuel subsidies could reignite foreign participation in the equities market from its current lows. There is also likely to be a bandwagon effect on the part of locals.
We scope for a positive re-rating of the Nigerian equities market, which is currently trading at a 19.1percent discount to its 10-year average level despite boasting higher Return on Equity (ROE) (19.2 per cent versus a 10-year mean of 15.2 per cent) and adjusted dividend yield (6.5 per cent versus a 10-year mean of 5.2 per cent).
In the medium term, overall macro improvements and a benign policy environment could enhance the fundamental values of equities and potentially support target prices”.
In the CardinalStone analysts view, the administration’s preference for a reduction in yields could be actualised by “first effectively combating supply-side drivers of inflation—the primary justification for the current hawkish monetary policy regime. However, resolving these supply-side issues will likely take some time, leaving latitude for high-interest rates in the near term, especially given the government’s borrowing needs vis-à-vis relatively tight liquidity”.