Listed stocks on the Nigerian Exchange Group (NGX) appreciated by N1.83 trillion in May, thus reversing the losses the Nigerian bourse suffered in March and April this year. The bullish sentiment in May, that some attributed to the ambitious plans of the new administration, has increased the year-to-date gain in market capitalisation of listed equities to N2.45 trillion.
Based on the findings of The Nigerian Observer on the performance of equities listed on NGX, the appreciation in equity prices in May 2023 is the largest monthly gain within the first five months of the year.
Riding on the euphoria of the new year, especially as investors rejigged their portfolios to take position in dividend paying firms, listed stocks gained N1.08 trillion in January 2023. In February, the gain in equity prices amounted to N1.40 trillion.
The positive trend changed as election began, confirming that investors took a cautious approach to the Nigerian capital market as market capitalization fell by N856.97 billion in March. It further fell by N1.009 trillion in April.
However, following the transition of government on May 29, optimism rose in the capital market, resulting in a gain of N1.83 trillion in market capitalization in May 2023.
Multiverse Resources has been exceptional in terms of price appreciation which currently stands at N4.09 per share, representing 1945 percent increase year to date. Also year to date, Meyer gained by 428.3 percent; Wema 419 percent; Tripple Gee, 306.3 percent; NAHCO, 281.4 percent, and Academy Press, 280 percent.
Others stocks that appreciated by at least 200 percent within the first five months of this year are Thomas Wyatt, 271.4 percent; MRS, 263.2 percent; BUA Foods, 224.8 percent; International Energy Insurance, 215.8 percent, Geregu Power, 213.9 percent, and Transcorp, 207.9 percent.
Capital market watchers believe the recent additional hike in the monetary policy rate to 18.5 percent by the Central Bank of Nigeria, preparing the ground for investors to seriously consider portfolio realignment in favour of fixed income in which will have effect on equity performance.
The CBN attributed its latest hawkish stance to the rising inflation and unimpressive output growth.
“In fact, the empirical evidence provided showed that whereas inflation in April 2023 stood at 22.22 per cent, the counterfactual evidence suggests that, it could have risen to 30.48 per cent in April 2023, had the MPC not taken any action to raise policy rates as it did since May last year. Indeed, the cumulative effect of MPC’s policy rate hikes moderated the rise in inflation by about 800 basis points since last year.
“The Committee was also concerned that output growth, on a year on-year basis dropped to 2.31 per cent during the first quarter of 2023 compared with 3.11 per cent during the first quarter of 2022. The challenge at this meeting, therefore, centered around whether to hold or loosen, in order to refocus on growth, or tighten further, in order to tame the rise in inflation. Members were, however, unanimous that given that rising inflation would hurt growth, it is imperative to continue to focus on price and monetary stability, though in a less aggressive manner,” Godwin Emefiele, CBN Governor, said in May 2023.
“We expect the interest rate hike to weigh on the stock market performance as investors reshuffle their portfolio in favor of fixed income assets” FDC said in its monthly publication for Unity Bank of Nigeria plc.