REVIEW: Investors Gain N4.45trn on Stocks in 2022

Out of many developments that characterised the Nigerian economy in 2022, activities in the country’s stock market cannot be ignored given that the capital market, according to experts, mirrors the realities of the economy.

In 2022, investors activities in the market were shaped by many macroeconomic and social realities such as government finance, oil price, global economic outlook, ease of doing business, inflation rate, fixed income rate, exchange rate and corporate performances of the companies listed at the Nigerian Exchange Limited (NGX).

Analysis of the market in 2022 by Business Metrics shows emergence of gaining and declining stocks where investors make some fortunes as well as lose some respectively.

It is however noteworthy that despite the many tricks of price rising and falling on investors and the oscillating nature of the benchmark market index, the Nigerian stock market posted a positive net return at the end of the year to drive home N4.45 trillion profit for investors.

Specifically, the All-share Index of the NGX added 8,534.62 points or 19.98% to close the year above 50,000 psychological points. It rose to 51,251.06 basis points to close in December from 42,716.44 points that it opened the year in January.

This is a better performance from 6.07% index growth recorded for 2021 when the ASI opened the year at 40,270.72 points.

Similarly, market capitalisation of listed securities at the Nigeria local bourse advanced by N5.62 trillion to close the year at 27.915 trillion, higher than N22.297 trillion it closed in 2021.  The upward change is equivalent to 25.2%.

The difference between the ASI and aggregate market value was due mainly to the listing by introduction of some equity assets, such as Geregu Power Plc and BUA Foods Plc, which led to primary increase in number and value of outstanding shares at the Exchange.

Sectoral Performance

Sectoral analysis showed that the Nigerian market performance was driven by widespread positive sentiments across the sectors, especially within the large and mid-cap stocks in the oil and gas, industrial goods, banking, and telecommunication sectors.

The NGX Oil and Gas Index led with an above-average return of 34.05 percent. The NGX Industrial Goods Index followed with an average gain of 19.67 percent. The NGX Banking Index posted a modest return of 2.81 percent.

The NGX 30 Index-which tracks the 30 largest stocks at the exchange, returned 6.98 percent.

The NGX Pension Index- which serves as a gauge for stocks that meet the more stringent investment guidelines for pension funds, rallied average gain of 10.37 percent while the NGX Lotus Islamic Index- which tracks stocks that comply with Islamic finance rules, closed with an average return of 7.69 percent.

However, the NGX Insurance Index and NGX Consumer Goods Index dropped by 11.99 percent and 0.06 percent respectively.

While investors recorded gains and losses in different equities at the market, it was generally a bumper harvest for discerning investors at the local bourse who staked fortune on stocks with healthy fundamentals that ultimately led to the gains in 2022.

NGX CEO Comments: On Friday December 30, 2022 , NGX CEO Temi Popoola who spoke during the last closing ceremony of the market for the year, emphasised the exchange’s impressive year, despite facing global macroeconomic challenges and volatility.

NGX CEO, Mr. Temi Popoola

“It’s been a fantastic year for NGX, with a positive 19.98% return,” said Popoola. “We’ve also seen several landmark listings in equity and fixed income, including BUA Foods and Geregu Power, which have played a key role in driving growth in the market this year.”

Nigeria Tops Global Stock Performance in 2022

The performance of the Nigerian market defied the largely negative global trend with major advanced and emerging world markets closing at their poorest levels in recent years.

The MSCI All-Country World Index posted a negative return of -20 percent in 2022, mirroring double-digit losses in America, Europe, and Asia.

In the United States, the S & P 500 Index and NASDAQ recorded average returns of -19.44 percent and -33.10 percent respectively. The Dow Jones Industrial Average dropped by 8.78 percent, underlining the complete bearish rout at the American market.

STOXX 50- which tracks the broad European markets, returned -11.74 percent. United Kingdom’s FTSE 100 recorded a modest gain of 0.91 percent. Germany’s DAX dropped by 12.35 percent, France’s CAC 40 Index lost 9.50 percent while Japan’s NIKKEI declined by 9.37 percent.

the positive performance of the local stock market in 2022 marked the third consecutive year of closing in the green territory even when global uncertainties leave sour tastes in the mouths of global investors in other market.

More importantly, it has become re-occurrent for the NGX to ride to profitability on the back of year-end rally amidst portfolio realignments by investors as they position for the full-year financial statements of listed companies.

Analysts’ Insights

President of, Chartered Institute of Stockbrokers (CIS), Mr. Oluwole Adeosun, said 2022 was a glorious year for the Nigerian stock market as it braced the turbulent global economic landscape and the tough domestic environment to sustain its rally.

President, Chartered Institute of Stockbrokers (CIS), Mr. Oluwole Adeosun

He noted that in the aftermath of the global headwinds, the Nigerian economy was characterised by rising inflation, rising interest rates, worsening security concerns, and a depreciating foreign exchange rate.

“Apart from the numbers, the market also took some important strategic steps to move the market closer to the highest global standards and ensure a prosperous future for the market and our investors.  The NGX launched the first exchange–traded derivatives (ETD) market in West Africa, with Equity Index Futures Contracts.

“We also witnessed the launch of the first Central Counterparty (CCP) Services (CCP) in West Africa, by way of NG Clearing which will facilitate the clearing and settlement of exchange-traded derivatives and commodities traded. Equally important is the African Exchanges Linkage Project (AELP) which has gone live on integrating African capital markets by facilitating cross-border trading and free movement of investments in the continent.

“So, given the underlying dire macro-economic context, the Nigerian capital market has performed very well in 2022. If the country is able to sail through the elections storms in February, we should expect a better year for the market in 2023,” Adeosun said.

Managing Director of APT Securities and Funds Limited, Mallam Garba Kurfi, said the market performance was boosted by large-cap stocks.

“Among the factors that contributed to this is that most of the major capitalised stocks, that is, Airtel Africa, MTN Nigeria, Dangote Cement, and BUA Cement, which control over 70 percent of the total market capitalization, gained about 50 percent during the period under review and qualified to invest in by pension funds administrators (PFAs), which they did,” he said.

Managing Director, ARM Securities Limited, Mr. Rotimi Olubi, noted the improved participation by local investors in the market, which closed the gap left by foreign portfolio investors.

According to him, positive earnings by several companies boosted investors’ confidence in the equities market, which led to improved participation by domestic investors, a major resistance block against the negative global sentiments fueled by the Russia-Ukraine conflict.

Chief Executive Officer, of Wyoming Capital & Partners,Tajudeen Olayinka, added that improved liquidity and the crash in the crypto market as well as automated dividend payments also supported the market.