The Nigerian stock market on Tuesday gave a rousing welcome to President Bola Ahmed Tinubu’s policy direction.
Intense bargain-hunting for Nigerian equities rallied the market to a net capital gain of N1.51 trillion, its highest gain in a day in two and half years.
The naira also recorded a marginal gain in response to the Presidential policy enunciation.
The benchmark index for the Nigerian stock market, the All Share Index (ASI), posted an average return of 5.23 per cent, its highest gain since November 12, 2020.
The gain by ASI, a value-based index that tracks all quoted shares at the Nigerian Exchange (NGX), was equivalent to N1.51 trillion.
The rally, on the first trading day after Tinubu’s Monday Inauguration Day address, pushed the average year-to-date return for Nigerian equities to 8.77 per cent, putting Nigeria back on the world’s chart of top stock market returns.
The aggregate market value of all quoted equities crossed the N30 trillion mark to N30.349 trillion yesterday, as against N28.844 trillion recorded at the weekend.
The momentum of activities at the stock market doubled by 133.4 per cent with a turnover of 1.08 billion shares valued at N15.8 billion in 9,916 deals, compared with a turnover of 461.78 million shares worth N7.68 billion in 6,520 deals recorded in the previous trading day.
Sectoral analysis showed a market-wide positive sentiment.
The NGX Banking Index rose by 8.2 per cent. The NGX Consumer Goods Index rallied 6.5 per cent. The NGX Industrial Goods Index rose by 6.1 per cent.
The NGX Oil & Gas Index appreciated by 4.0 per cent while the NGX Insurance Index improved by 2.3 per cent.
Tinubu, in a speech that had been described as market-friendly, addressed general issues of security, economy, infrastructure and monetary outlook.
The president also directly addressed investors’ concerns on multiple taxations, returns repatriation and convergence of multiple foreign exchange (forex) rates among others. He also spoke about putting an end to petrol subsidy.
“I have a message for our investors, local and foreign: our government shall review all their complaints about multiple taxations and various anti-investment inhibitions.
“We shall ensure that investors and foreign businesses repatriate their hard-earned dividends and profits home,” Tinubu said in his inauguration speech.
Market analysts were unanimous that the stock market performance was in response to Tinubu’s inauguration address, with a consensus that the general policy direction would significantly uplift the Nigerian economy and drive foreign and domestic investments in Nigerian assets.
The equities rally also came as Nigeria’s sovereign dollar-denominated bonds rallied on the back of the announcement of both subsidy removal and the harmonisation of the exchange rates on the investors and exporters window (NAFEX) and the parallel markets.
The forex market also responded positively with the naira appreciating by 10 basis points at the popular parallel market.
A spot market survey showed that the naira yesterday rebounded to N770 per dollar at the parallel market, as against N780 per dollar recorded in the previous day.
The naira was, however, flat at N464.50 per dollar at the official Investors and Exporters (I&E) window.
Managing Director, APT Securities and Funds Limited, Mallam Garba Kurfi, said the market was responding to the expectations of reforms implied in the president’s address.
“The speech is excellent, especially as regards converging exchange rates into one; that will attract an inflow of foreign Investors.
“The removal of fuel subsidy will attract more investments in the refineries and removal of double taxes will also bring more Investments into the country, and all these will reduce unemployment and increase productivity,” Kurfi said.
Group Executive Director, Investment Banking, Cordros Capital, Mr. Femi Ademola, said the market was expected to respond to the pro-economy outlook of the Tinubu administration.
He said the peaceful transition of power and the inaugural speech “struck the right cords” since markets react to sentiments.
According to him, the market is expected to react very strongly and positively to the government agenda, including the end to fuel subsidy, lower interest rates, end to multiple exchange rates and ease of capital repatriation by foreign investors.
“These are expected to attract investments back into the country as investors return and strengthen the country’s exchange rate. Perhaps, one very notable issue is the issue of lower interest rates.
“This may indicate that the administration will not be looking at attracting portfolio investment with high-interest rates but the more likely direct and patient investment that would stay for a longer period.
“While the market may still continue with its usual zigzag movements, the implementation of these policy reforms would ensure more positive movements on the market than negative.
“Supporting the monetary policy changes with the required fiscal reforms such as infrastructure development would add to the sustainability of the growth plan for the economy.
“I am happy with the inaugural speech and the plans of action as it is what is needed at this time. However, it has to go beyond words and intentions, the administration must hit the ground and run with the implementation of the policies,” Ademola, a senior investment banker, said.
Chief Operating Officer, GTI Capital Group, Mr. Kehinde Hassan, said the general economic outlook enunciated by the president would herald new thematic growth for the economy.
He said investors appeared favourably disposed to the various initiatives, noting that the market response was a sort of vote of confidence in the president’s economic direction.
Afrinvest Securities said “economy reform optimism” bolstered the market performance, noting that “the rally in the market followed the promise of critical reforms by the President Bola Tinubu administration”.
”President Tinubu’s inaugural address sparked the equity market’s imagination, with a rally of 5.23 per cent today (yesterday).
“The announcement of key market reforms, including phasing out fuel subsidies and unifying foreign exchange rates, shows that pro-market policies were not just items in the manifesto but issues which he is setting out to fix. If they are fixed, we expect much more from the equity market,” Coronation Securities Limited stated.
Analysts at Arthur Steven Asset Management said the equities market’s bullish momentum was “because of the new administration which tends to affect the market positively”.
“The market reacted to the high expectation from the new administration as the government promised the investors easy repatriation of their investment and profit,” they stated.
Cordros Securities said the resumption of the market on a positive note was similar to investors cheering “President Tinubu’s pro-market policies”.
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