The Nigerian equities market has witnessed an impressive three-month bullish rally since President Bola Tinubu assumed office on May 29, 2023, making history as the first newly elected Nigerian President to achieve such a milestone.

During this period, the All-Share Index (ASI), the key indicator of the Nigerian Exchange Limited (NGX), surged by a remarkable 19.33%, reaching a historic high of 66,548.99 points as of August 31, 2023, surpassing its previous record set in March 2008.

Several factors have contributed to this positive performance, including the removal of fuel subsidies, the relaxation of foreign exchange restrictions, and a reduction in interest rates. Additionally, investor sentiment has been buoyed by optimism surrounding President Tinubu’s economic policies.

Upon closer examination by Nairametrics Analysts, it becomes evident that the Nigerian stock market displayed a strong initial reaction to President Tinubu’s election in 2023, with the ASI gaining 5.22% on his first day in office.

This stands in stark contrast to the modest 0.14% gain observed on the first day of President Goodluck Jonathan’s term in 2011 and the 0.77% loss recorded on the first day of President Muhammadu Buhari’s term in 2015.

Comparing the performance of the NGX ASI during the initial three-month periods of the past three presidential administrations, it is evident that the market has thrived under President Tinubu’s leadership. During the same timeframe, the NGX ASI experienced a significant depreciation of 13.48% under President Buhari in 2015 and 16.89% under President Jonathan in 2011.

As a result of this positive momentum, the Nigerian Exchange Limited (NGX) has emerged as one of the best-performing stock exchanges in Africa during this three-month period.

According to African Markets, a platform tracking exchange performance on the continent, the Ghana Stock Exchange led with a 22.84% gain, followed closely by NGX with its impressive 19.33% increase, and the Malawi Stock Exchange with a 15.79% rise.

15-year high

This market surge has propelled the Nigerian stock market to a 15-year high, driven by strong investor sentiment. The market capitalization of listed equities, which opened June 2023 at N30.366 trillion, closed the month at N36.422 trillion, representing a significant gain of N6.056 trillion.

Similarly, the All-Share Index (ASI), reflecting the overall performance of Nigerian stocks, commenced June 2023 at 55,769.3 index points and concluded the month on August 31 at 66,548.99 points, marking a substantial gain of 10,779.6 basis points or 19.33%.

Favorable policies

Investor interest in low, medium, and high-capitalized stocks across key sectors has been a driving force behind this bullish trend. President Tinubu’s administration introduced several favourable policies, such as the removal of fuel subsidies, the unification of exchange rates, and the strategic positioning of investors to capitalize on robust earnings reported by listed companies.

Additionally, the formation of the country’s economic cabinet and executives has contributed to the overall optimism in the market.

What the analysts are saying:

Despite some mixed sentiments during the review period, market analysts maintain an optimistic outlook, particularly among domestic investors who anticipate positive economic developments.

United Capital analysts, in their H1 2023 review and H2 2023 outlook report, emphasize the potential upside resulting from the new administration’s policies, particularly the unification of the exchange rate and advocacy for a lower interest rate environment.

These factors are expected to bolster investor confidence, especially during earning seasons.

The analysts anticipate a favourable market environment for the Equities Market in H2-2023, driven by these expectations.

They also highlight the prospects of a more liquid financial system, driven by the Central Bank’s aim to lower interest rates, and the positive impact of improved foreign participation.

Consequently, they predict that the equities market will remain the most attractive segment for both local and foreign investors, with a strengthened Naira, reduced tax burdens, and easier repatriation of foreign exchange enhancing its appeal.

According to the Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, a Demographic shift has happened in the NGX in the last few years.

• “We now have more local institutions and retail investors in the market than foreign portfolio investors. The reverse used to be the case, this shift has naturally reduced volatility in stock prices as the locals are likely to have more faith in the local market than foreigners. That’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.” 

Amolegbe further said that the expectation that the policies will encourage the inflow of foreign investment is the primary trigger that is causing the stock market rally.

• “The second trigger will include the fact that some of these policies will lead to a short-term increase in inflation level and typically stock prices tend to rise along with inflation,” he said. 
• He explained that the other driver might also be the fact that we are moving toward the end of the first half of the year, and this normally leads to portfolio rebalancing by fund and asset managers, 
• “They rebalance their portfolio every quarter and every half year and this normally results in the stock rally,” he said.