The month of November saw the Nigerian Stock Exchange (NSE) gain N203 billion after a shrink of N642 billion October, as the policy of the Central Bank of Nigeria (CBN) to restrict individuals and local firms from open market operations auctions impacted the market positively.

According to This Day, the market gained N203 billion to see the All-Share Index (ASI) increased by 2.4%, moving to 27,002.15 compared to the N621 billion loss, and a 4.9% decrease suffered by the All-Share Index in October. The market capitalisation of the Nigerian Stock Exchange rose to N13.04 trillion from N12.83 trillion.

Meanwhile, the uptick in the performance of the NSE, according to analyst and market stakeholders could be attributed to increased demand for stocks, as some investors shifted focus from fixed income securities, given the restriction of individuals and local firms from the purchase of some money market instrument. There was also significant bargain hunting as investors took advantage of the attractive valuations as equities dipped to a two-year low.

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However, improved performance of the Nigerian Stock Exchange did not come as a surprise to analysts, as everyone expected a turnaround in the fortunes of equities when the CBN gave the directive in a circular titled: “Re: Open Market Operations Auctions,” dated October 24, 2019, and signed by its Director, Financial Markets Department, Dr Angela Sere-Ejembi.

Opinions of some industry experts:  “But the situation will keep improving. You can see how the CBN’s policy on OMO, which drove down the yields on fixed income securities, attracted patronage to the equities market. The stock market has potential to handsomely reward investors who are not risk-averse. Last week alone, for instance, some stocks recorded capital appreciation of between 11% and 30%,” said Mr Ayo Oguntayo, a stockbroker.

[READ MORE: Analysis: Why the stock market is rallying in November]

The market fundamentals, despite the persistent illiquidity, are still very strong and prices of quoted securities can only go up, which will be triggered by both arbitrage income and dividend income. Based on the third-quarter results being released by the quoted companies, especially the banks, the market is where to be now,” Managing Director/CEO of Network Capital Limited, Mr. Oluropo Dada said.

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There is real hope this could be good for equities. We should see a lot of corporate heavyweights gain in coming weeks as pension funds look for high-yielding investment,” Michael Nwakalor, CardinalStone Partners Limited.


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