In an extension of their impressive performance in recent years, Nigerian stocks closed 2023 in Lagos on Friday, gaining 46.6 percent or 13 trillion naira.
This means that the market value of the shares improved by almost half compared to last year.
On Friday, the total value of the 155 shares at the end of trading stood at N40.9 trillion.
A change in government in May prompted a pair of market-friendly reforms that boosted stock prices and propelled the benchmark stock index to its all-time high of 74,773.77 basis points at the end of the year.
But the case is different for the naira, which ended the year as the world’s worst-performing currency after the Argentine peso and the Lebanese pound among the 151 currencies tracked by Bloomberg.
The currency of Africa’s largest economy is little better than dross after a devaluation of around 40 percent in June and the ensuing free fall left it battered.
Stocks are booming among local investors in Nigeria, where they returned up to 50 percent in 2021, weathering pandemic lockdowns to earn the Nigerian Exchange the honor of being the world’s best-performing stock exchange that year. Last year, the stock returned 20 percent despite the challenges.
As in recent years, local participation in the stock market drove activity this year, accounting for 88 percent or 2.9 trillion of total trade in November, according to the NGX Foreign Portfolio Investment Report.
That compares with 2022, when cash from local investors accounted for 83.3 per cent or N1.8 trillion of all trade.
Foreign investors only contributed 11.2 percent or N362.8 billion, down from 16.7 percent of N364 billion in 2022.
The drop reflects the dilemma of attracting international investors to Nigerian stocks, in which foreign investors are reluctant to invest because a prolonged shortage of foreign exchange in Nigeria could make it difficult for them to repatriate their profits when the time comes.
In total, N3.2 trillion worth of stocks were traded in November, compared to N2.2 trillion a year earlier, representing an increase of 45.5 per cent.
A major factor boosting interest in stocks was Nigeria’s persistent inflation, which hit an 18-year high in November, reaching 28.2 percent. That caused many investors to dump bond-for-equity securities as their real returns turned negative in the face of high price levels.
“To start, the year started on a good note. Of course, we saw that the rally that occurred after the announcement of the removal of the fuel subsidy and the reactions to the company’s results for nine months were also things that stimulated the market,” Praise Ihansekhien, who heads investment research at Meristem Securities, based in Lagos. .
“Some companies also took some corporate actions. We had companies announcing mergers like Dangote Sugar and NASCON. “I will say it was a mix of macroeconomic factors and corporate actions.”
Ihansekhien believes the current positive sentiment will persist to some extent over the next year and expects a rise in corporate shares, new listings and a higher rate of economic growth to boost stocks.
Performance by sector
NGX Oil and Gas
NGX Oil & Gas, the index that tracks the most capitalized and liquid stocks in the energy sector, ended the year as the best performing sector. The index returned 125.5 percent.
NGX Banking
The NGX banking index was next in the pecking order of performance, appreciating 114.9 percent.
NGX Consumer Goods
The NGX Consumer Goods Index, the index that tracks the most capitalized and liquid stocks in the consumer goods industry, returned 90.4 percent.
NGX Insurance
The NGX insurance index returned 84.6 percent.
NGX Industrial
The NGX industrial index lagged behind the five sector indices tracked by the stock market. It returned 12.9 percent.
NGX 30
NGX 30, which tracks the top 30 companies on the stock market in terms of market value and liquidity, returned 51.4 percent.
The 5 best performing stocks
STOCK MARKET PROFIT
1. Transcorp Hotels 1,023 percent
2. Chams 795 percent
3. Computer Store Group 722 percent
4. Transcorp 666 percent
5. MRS Oil 645 percent