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What exactly is going on in the Nigerian stock market?

If you follow my handle on Instagram

You’ll know I put up a post, this week, about not missing out on the current rally action in the stock market

That’s because in the past few weeks of 2018, there has been a ‘rally‘ in the market.

A ‘rally’ is a period of sustained increase in the prices of stocks, bonds or indexes.

To give some background, CNN, the global cable news network , released a report at the end of 2017 stating the Nigerian stock market as one of the biggest stock winners in 2017.

The report examined the performance of top stock markets and listed the following markets; United States (25%), Nigeria (42%), Turkey (43%), Argentina (73%) and Hong Kong (35%) as the global front runners in terms of performance.

The image below shows an interesting chart. You will notice that the stock market started the year, 2017, negative and the recovery started in May.

It’s interesting because, I wrote a blog post, in May 2017, analyzing if the stock market was a dead end or growth opportunity, based on the ongoing economic pessimism at the time.

It appears it was an opportunity after all. But the question now is, is it growth or just a recovery of the market?

Recovery or growth

The All-Share Index (ASI) tracks the general market movement of all listed equities on the Exchange.

The CNN money report compared indexes across countries and Nigeria’s ASI had a 42% rally in the second half of 2017. The ASI had a year low value of 24,581.99 in March, 2017. However, it picked up momentum in the second half of the year and crossed the 39,000 mark early January 2018.

However, experts say the Nigerian All-Share index is still miles below its record high set in early 2008.

The ASI hit 66,000 points at the height of the stock bubble in 2008 so experts see the recent spurt as a market recovery and expect more growth before the second half of the year. There is, however, slight caution about the pre-election risk in the second half of 2018 (Nigerians go to the polls to vote in a new president in 2019), but we do not expect a major shaking.

Economic factors to watch

Generally speaking, the stock market reflects the economic macro-conditions of the economy. The index experienced all time low figures in 2015 and 2016 due to macro economic conditions such as low oil prices, militant attacks,  a weak currency, change in leadership.

So, let’s take a look at some macro economic conditions. If we compare macro economic conditions in 2017 to what we have at present, here are a list of factors that may be causing the current optimism in the Nigerian economy.

  • Crude oil price hit $67 per barrel, for the first time in 2 years, in December 2017. Current price per barrel (as at January 19th, 2018) sits at $63.60
  • Inflation dropped to its lowest since April 2016; 15.4%, in December 2017 and has stayed relatively stable
  • Renewed confidence of foreign investors in the market due to the investor window created by the Central Bank of Nigeria (CBN)  to boost liquidity and ensure timely execution for international transactions

 

What to expect in the coming months?

At a review event at the NSE, Chief Executive Officer  Mr Oscar Onyema gave an encouraging outlook for the Nigerian capital market.1

”Indeed, to some extent, political activities and currency movements will have some effect on the market [in 2018/2019], but we expect that such impact will be short-lived and the performance of the underlying business activities will ultimately determine market performance,”.2

Again, my words of caution are; don’t invest in what you don’t understand, Know your risk tolerance level and get an expert’s opinion on what to invest in before you take the plunge

This is what members of the green club get access to conveniently. Thinking of joining a group of 80+ members from 5 countries actively taking investment decisions, click here to get on the wait list

I’ll end with this fun fact

Did you know that the Nigerian stock market is one of the cheapest markets in the world? The most expensive stock in the market is less than $5?

While, the USA has the least affordable market in the world.

What has been your experience investing in the Nigerian stock market? Feel free to share below

 

 

References

  1. http://thenationonlineng.net/nigerian-equities-hit-time-n15-78tr-high/
  2. http://thenationonlineng.net/nigerian-equities-hit-time-n15-78tr-high/
  3. http://money.cnn.com/2017/12/27/investing/best-stock-markets-2017-world/index.html

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