…NGX-ASI Drops 7.8% •Shares Turnover Hits N45,506bn
July 11, (THEWILL) – Six months into the waning euphoria of emerging the world’s best performing stock exchange, Nigeria’s equity market is beginning to adjust to the realities that shaped its outlook in the first place. THEWILL investigation showed that the nation’s bourse recorded a total of 533,820 deals in the first half of the year (H1-2021) with investors losing N1.76 trillion as All-Share Index dipped by 7.8 percent.
The sharp downward curve in the equity market graph represents investors’ sentiments as they troop back to the fixed income market on reversal of the low-interest environment, following the Federal Government’s renewed appetite for borrowing.
The market, which recorded N21.52 trillion on the first trading of the year on January 4, 2021, closed negative on 30th June, 2021 with N19.77 trillion, showing N1.76 loss or 8.15 percent. Similarly, the All-Share Index dropped 3,240 basis points from 41,147.39 to 37,907.28.
Compared to the corresponding period of the preceding year, H1-2021 results showed a remarkably positive difference as H1-2020 market capitalisation was only N12.76 trillion. This showed a drop of N7 trillion, representing 55 percent, compared to the H1-2021 market capitalisation.
Total shares turnover in H1-2020 was N36.88 billion, compared to N45.50 billion in H1-2021, showing a rise of N8.62 billion or 23.38 percent. The turnover value was N414.52 billion in H1-2020, with 527,663 deals, as against H1-2021 figures of N1.69 trillion and 533,820 deals respectively.
Monthly disaggregation for H1-2021 showed 13.7 billion shares turnover yielding N106.47 billion in 121,450 deals in January; while February shares volume 8.29 billion recorded N753.57 billion in 106,663 deals.
March 2021 transactions showed N653.36 billion value from 9.084 billion shares turnover achieved in 103,556 deals; followed by a total turnover of 5.193 billion shares in 76,933 deals yielding N72.98 billion in the month of April 2021.
Trading activities in May showed a total shares turnover of 5.427 billion in 104,055 deals resulting in transaction value of N56 billion; while June trading ended with a value of N47.7 billion from 67,585 deals in 4.067 billion shares.
On quarterly segments, the first quarter (January-March 2021), recorded aggregate trading of 31.704 billion shares in 241,669 deals, resulting in a total sum of N1.52 trillion; while the second quarter (April-June) trading in 14.687 billion shares yielded the sum of N176.7 billion in 67,585 deals.
Life has returned to the fixed income market, which was deserted by investors over three years ago when they trooped to the equity market where yields offered better prospects. The fixed income market had been a desolate place because of the government’s deliberate, but misplaced, decision to starve the window of yields. It urged investors to turn to the equity market to drive the real sector and boost production, while it looked for foreign loans to fund its budget and building of infrastructure.
All these have changed. The government has returned to the debt market as it combs every corner for loans. Experts have predicted that the Federal Government’s yawning appetite for borrowing will ignite a rally in the low interest environment of the fixed income market. This will also set the pace for a corresponding downturn in the stock market, which has seen an unusually bullish trend amid the COVID-19 pandemic.
The Federal Government had said it would borrow about N709.69 billion from domestic and foreign sources, including multilateral and bilateral finance organisations, to finance the 2021 federal budget deficit of N5.2 trillion.
The Federal Government has been battling with acute revenue shortage arising from volatility in oil prices in the international market. It has not achieved its revenue budgets since 2016, while recurrent expenditure is fully executed, hence the borrowing spree to finance its expanding recurrent budget. Ironically, its expanding recurrent budgets have maintained unyielding consistency
In recent times, bargain hunters had deserted the equity market for the fixed income market to invest in government securities Treasury Bills and Government Bonds which offered handsome yields. About three years ago, treasury bills were sold at double-digit rates and this attracted many investors who showed interest in it, including banks and other institutional investors. That era is back.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
