The NGX All-Share Index experienced a significant decline in April, losing N3.57 trillion in market value.
This downturn represents the first monthly decline for the NGX this year, contrasting with gains of 17.7%, 12.47%, and 5.64% recorded in January, February, and March respectively. Despite this setback, the NGX is still up by 31.36% year-to-date.
The sharp drop in the index was influenced by several policy announcements from the Central Bank of Nigeria (CBN). Notably, the CBN announced a new recapitalization plan for commercial banks, aiming to raise an estimated N4 trillion in fresh capital over the next two years.
Further exacerbating the market’s reaction was the decision by the CBN’s Monetary Policy Committee (MPC) to increase the benchmark interest rate by 200 basis points, moving from 22.75% to 24.75%.
This significant rate hike led to intensified sell-offs, resulting in a 6% decline in the local bourse, with the benchmark index closing at 98,225.63 points.
Notably, the NGX All-Share Index fell below the 100,000-point threshold, finishing the day at 98,225.63 points, a stark contrast to its peak of 104,562.06 points at the end of March 2024.
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Market performance
- According to data from Nairametrics, the Nigerian Exchange Limited (NGX) All-Share Index, which broadly measures the performance of stocks in Nigeria, experienced a notable decline in April.
- Opening at 104,562.06 index points on April 1, 2024, it closed at 98,225.63 points by the end of the month on April 30. This represents a decrease of 6,336.43 basis points, or 6.05%.
- Further analysis indicates that the NGX opened the trading month with a market capitalization of N59.120 trillion and concluded at N55.553 trillion. This reflects a month-to-date loss of approximately N3.567 trillion.
- The banking All Share Index led the worst performing index losing an estimated 25% in April alone and down over 15% Ytd.
The significant increase in interest rates by the Central Bank of Nigeria has also played a crucial role in this shift. The higher rates have diverted trillions of naira from the stock market to the fixed income market, as investors seek out higher yields.
This migration of capital has further impacted the performance of equities, contributing to the substantial losses observed in April.
Some market analysts also attribute the downturn to a combination of profit-taking by investors following a significant bullish rally and a shift in investment focus towards the fixed-income markets, prompted by the recent policy rate hike. This shift has further impacted on the performance of the equity market.
What analysts are saying
The Managing Director, of Crane Securities Limited, Mr. Mike Eze in a chat with Nairametrics attributed this downturn to investors capitalizing on profits following a notable bullish rally observed in recent times and also the monetary policy rate hike of 24.75% from 22.75%.
He said with the further hike, investors will navigate towards the fixed income space because there is no sentiment when it comes to investment.
- “The purpose is for high return and stability of capital. There is no sentiment attached to it. Investors are navigated towards fixed income space because it is not favourable. Considering the current CBN MPC announcement on further hiking the rate to 24.75% there will be negative effects on the market.
- It is the only the conservative investors in the market that will retain their investment in the stocks while watching the trends,” he said.
Eze noted that the market is information and with the current announcement on the rate hike, there will be a further run on the stock market because investors are going to move to the fixed-income segment in order to reap high returns on their investments.
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Victor Chiazor, Analyst and Head of Research at FSL Securities Limited, commenting on the stock market in an exclusive chat with Nairametrics, noted that investors are now more informed and engaged, particularly seeking higher returns, especially for traders.
- “With many listed securities having already disclosed full-year earnings and dividends marked down, investors are opting to shift their positions from equities to the fixed income market due to the appealing yields available in that sector,” he said.
