CEM REPORT, MARKET | Nigerian Exchange (NGX) is the place to be in 2024. After a stellar 2023 marked by record-breaking trades, soaring returns, and now, the coveted title of “world’s best,” the Nigerian Exchange Limited (NGX) is attracting investors from across the globe. But what fueled this remarkable rise, and what does it hold for the future?
A dive into the domestic and foreign portfolio investment report of the Nigerian Exchange Limited provides a glimpse, although with caution.
NGX 2023: A Year of Milestones
2023 was a year unlike any other for Nigerian equities. Investors traded a staggering ₦3.58 trillion worth of stocks, a 54.3% increase from 2022. While July saw the highest monthly volume (₦702.98 billion), March lagged with ₦146.22 billion. This surge surpasses even the 2007 high of ₦4.172 trillion, showcasing the market’s newfound dynamism.
Interestingly, domestic investors dominated the scene, contributing ₦3.167 trillion (88.52%) of total trades compared to ₦410.62 billion (11.48%) by foreign counterparts. This shift in participation reflects growing local confidence and a maturing market.
The year ended with a bang, with the NGX All-Share Index (ASI) at 74,773.77 points and equities capitalization at a whopping N40.917 trillion. And the cherry on top? A remarkable 45.90% return, defying pre-election jitters and exceeding all analyst expectations.
Nigeria’s Stock Market Global Ascendancy
The momentum has continued into 2024, with the NGX ASI surpassing the 101,000 mark in January, propelled by major players like BUA Cement. This surge has placed Nigeria atop the global leaderboard, surpassing Argentina as the market with the best year-to-date (YtD) returns (35.84% as of January 26, 2024).
Foreign Participation and Investor Segments:
While domestic investors remain the driving force, foreign inflows are steadily increasing. In 2023, foreign inflows reached ₦174.80 billion, while outflows stood at ₦235.82 billion. This trend is expected to continue as Nigeria’s market gains international recognition and stability.
Interestingly, 2023 also saw a significant rise in domestic retail investor participation, who traded equities worth ₦1.120 trillion compared to ₦642.73 billion in 2022. This suggests growing financial literacy and democratization of investment opportunities within Nigeria.
Analysis Comment
Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management, attributes the 2023 performance to a combination of factors, including “investor optimism fueled by improved political stability, positive economic data, and attractive valuations.” He adds, “the market defied historical election-year trends and surprised everyone with its resilience and record-breaking achievements.”
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Looking ahead, Amolegbe advises investors to “be mindful of potential inflation and interest rate hikes” and “consider a strategic tilt towards equities in the first half of 2024, while monitoring the macroeconomic landscape.”
Analysts, however, urge caution when interpreting January rallies. While historically, a positive January has often predicted a positive full year (80% of the time in the past 15 years), there have been exceptions like 2011 and 2018. Nevertheless, the current bull run’s strength and consistency present promising signs for continued growth.
Nigeria’s stock market is experiencing a golden age. With record-breaking trades, stellar returns, and global leadership, the future looks bright for investors. Whether you’re a seasoned player or a curious newcomer, it’s time to take notice of this African powerhouse. Just remember, as with any investment, careful research and a diversified portfolio are key to navigating the exciting, yet dynamic, world of Nigerian equities.
