Records fall as NGX sees 45.9% YtD gain in headwinds defiance

• High-profile billionaire-associated companies contribute to market performance 

• Otedola, Rabiu, Elumelu, Dangote in frame

In a stunning show of resilience, the Nigerian Exchange (NGX) closed 2023 with a stellar 45.9 percent gain in its All Share Index (ASI), defying the challenging economic environment and demonstrating the strength of the Nigerian capital market and the potential it holds for investors.

This will be the best performance since 2020 and it has been achieved despite the difficult economic conditions facing the country. This was particularly impressive given the high inflation, a depreciating exchange rate, and ongoing security challenges facing the country. Notably, it demonstrated the strength of the Nigerian capital market and the potential it holds for investors.

The performance is even more notable given that it was achieved in the face of severe economic headwinds, including a record-high inflation, weakening currency, and escalating security challenges. In fact, this rally marks the third-best annual showing for the NGX in the last decade, trailing only the 50 percent rise seen in 2020 and 47 percent gain in 2013. It was also the ninth-best annual performance in the exchange’s 39-year history.

On the last trading day of 2023, the NGX reached a historic high, with the ASI increasing by 0.36 per cent  to close at 74,773.77 points, surpassing the previous day’s record of 74,502.58 points. This was the highest closing level for the NGX ASI since the index was introduced in 1984, marking a milestone in the exchange’s history.

The NGX had a remarkable year in 2023, beginning with an index value of 51,251.06 points and closing at a record high of 74,773.77 points, an increase of 45.90 percent for the year. The market capitalisation also saw a significant jump of N148 billion to N40.92 trillion, from N40.77 trillion at the start of the year.

Several companies listed on the NGX experienced notable changes in their share prices on the last trading day of 2023, including MTNN, GTCO, BUAFOODS, and ZENITHBANK. However, the standout performer was Transcorp Hotel, which saw a remarkable 1,022.9 percent increase in its share price over the course of the year. This stunning growth was fueled by a series of positive developments, including the opening of new branches, improved profitability, and strong investor sentiment.

Analysts believe that a key driver of the NGX’s success in 2023 has been the surge in money supply, which reached N65 trillion as of September 2023. This has been seen as a positive development for the stock market, as the highly liquid nature of stock market trading has made it an attractive investment option for investors. The increased money supply has also led to lower interest rates, making it more cost-effective to borrow funds for investment purposes.

The NGX’s record high was further supported by a number of new listings on the exchange in 2023. These included MeCure Industries Plc, VFD Group, Nigeria Infrastructure Debt Fund (NIDF), and Africa Plus Partners. The addition of these companies to the stock market provided new opportunities for investors and helped to boost overall trading activity.

One of the key factors behind the NGX’s stellar performance in 2023 was the significant investments made by a number of high-profile billionaires, including Femi Otedola, Abdulsamad Rabiu, Tony Elumelu, and Aliko Dangote. These individuals are associated with companies that were among the top performers on the stock market, including Zenith Bank, Transcorp, GTCO, BUA Foods, and Dangote Cement.

The “Stocks Worth Over One Trillion” (SWOOT) group was a major contributor to the growth of the NGX in 2023. Seven of the eight companies in this group saw double-digit gains, with BUA Cement being the sole exception. Notably, BUA Foods and Seplat registered gains of 197 percent and 110 percent, respectively.

It is worth noting that, in stark contrast to the strong performance of most listed stocks, only 11 of the 156 companies ended the year in negative territory, while 21 remained flat. The remaining 121 stocks all posted double-digit gains, demonstrating the widespread nature of the rally. This indicated that the success of the NGX was not driven by just a few companies, but rather by a widespread trend of gains across the board.

Tajudeen Olayinka, chief executive officer of Wyoming Capital and Partners, described the 2023 stock market performance as “quite eventful and bullish.” In his view, the market saw significant activity and positive sentiment throughout the year. He added that investors kept an optimistic outlook on the market despite the disruptions in the economy.

Speaking further on the 2023 stock market performance, Olayinka said, “We saw a market that picked its 2023 position way back in November 2022, when it was obvious that the three leading presidential candidates, namely: Asiwaju Bola Tinubu, Peter Obi and Alhaji Atiku Abubakar, that could succeed former President Muhammadu Buhari, were pro-market.

“And so, the build-up to the bullish run in 2023, that started in November 2022, was a demonstration of market confidence in a private sector-centric president.”

Olayinka explained that the inaugural speech of President Tinubu in January 2023, in which he announced plans to remove fuel subsidies and unify the exchange rate, had a positive impact on investor confidence. He suggested that this “pent-up confidence” had been building for some time, but had finally been released following the president’s announcement. The resulting confidence, he said, persisted throughout the year and played a key role in the bullish market performance.

In terms of what to expect from the market in 2024, Olayinka is optimistic about the future. He predicts that the positive momentum from 2023 will continue, with the market likely to see further gains. He added that this will depend on the implementation of the government’s economic policies, but that he is confident that the market will continue to perform well.

In his words,  “We can draw that from the 2024 budget proposal of President Tinubu, where total reliance has been placed on the use of private capital in funding some important developmental projects across the country. In a way, we are going to see more public companies get listed on the stock exchange for the purpose of raising new capital, while the existing listed companies will not be left behind in this development.”

In his forecast for the year ahead, Olayinka noted that the primary market is likely to be “very bullish and active” in 2024, even if there are occasional fluctuations in stock prices as investors take profits and rebalance their portfolios. He believes that the private sector will play a key role in driving the economy out of its current state of disequilibrium, which will ultimately benefit the capital market.