In February 2025, the Industrial Goods sector, tracked by the NGX Industrial Index, staged a significant correction in the Nigerian stock market, soaring by 10.78% driven by positive individual stock performances.
Heavyweight Dangote Cement experienced an impressive increase of 21.83%, Lafarge gained 5.63%, and Beta Glass soared by 39.65%.
These gains were likely fueled by positive investor sentiment following the release of strong full-year 2024 results from these companies.
The index climbed from a low of 3,267.66 points in January 2025, marking its most significant correction since it fell from a peak of 5,637.83 points in January 2024.
A decline that began in February 2024 persisted throughout the year and into January 2025, making the February 2025 correction even more impactful.
Now, the crucial question arises: can the Industrial Goods sector maintain this upward momentum into the second quarter and regain a bullish trajectory?
To explore this, we reached out to experts for their insights.
Positive market sentiment for the heavyweights
Abeeblahi Rufai, an analyst at CardinalStone, noted that positive movements among cement companies in February contributed to a notable correction in the indices.
He stated, “Large-cap companies, primarily in the cement sector, had a decent month in February in the Nigerian stock market, which helped the industrial goods index recover after a decline that began in February 2024.”
- He also mentioned that the favorable Q4 2024 results from several industrial goods companies likely influenced the index positively.
“Dangote Cement experienced a solid increase of over 21%. While BUA Cement remained steady, Lafarge gained 5.63%. Even Beta Glass saw a significant rise of 39%,” he observed.
Rufai suggested that if the positive trends in cement companies persist into the second quarter of 2025, it could support the growth of the industrial goods sector.
“If Dangote’s Q1 2025 results are strong and BUA Cement’s FY 2024 momentum continues into the second quarter, we might see a rally in the index.”
He also added, “If the potential acquisition of Lafarge is finalized in the second quarter, the market may react positively, given that the takeover price is expected to exceed the current valuation.”
FX pressure reduction, better margins
Rufai highlighted that the Naira has shown significant stabilization so far in the first quarter of 2025, with improvements in foreign exchange (FX) liquidity.
“Since late Q4 2024 into Q1 2025, the Naira’s stability has allowed many industrial goods stocks to mitigate FX losses, resulting in better margins for their upcoming quarterly results.”
Echoing this sentiment, Mr. Olatunde Amolegbe, MD/CEO of Author Steven Asset Management Ltd, suggested that if this FX stability continues into the second quarter, industrial goods stocks will likely rally.
“With the exchange rate showing signs of improvement, we can expect enhanced performance from these stocks in Q2.”
He credited the industrial sector’s February gains to the Naira’s increased stability, noting, “This may explain the recent surge in the sector.”
- Arnold A. Dublin-Green, Chief Investment Officer of Cordros Asset Management, reinforced this outlook in a February investor letter.
- He pointed out that industrial goods companies, particularly those linked to infrastructure and construction, stand to gain from diminished costs associated with currency fluctuations.
“Industrials focused on infrastructure and construction will benefit from both lower borrowing costs and a more stable Naira,” he stated.
Positive macroeconomic moves
Arnold A. Dublin-Green stated that a projected rate cut by the Central Bank of Nigeria in May 2024, as forecasted by Cordros Asset Management, could play a crucial role in stabilizing the equities market in 2025, assuming that inflation and FX liquidity remain stable.
“The stability of the Naira encourages oil companies to convert foreign currencies into Naira within the local market. This shift could enhance liquidity and attract more investors to risk assets like equities,” he explained.
He also highlighted that the industrial goods sector, along with consumer goods and banking, is likely to benefit the most from the surge in equity investments driven by the rate cut.
“This presents a compelling case for Nigerian equities. With interest rates expected to decline, inflation stabilizing, and FX liquidity improving, the outlook is promising.”
- Cordros projects that the inflation rate will decline further to 23.5% by 2025, prompting the Central Bank of Nigeria to reevaluate current monetary conditions as restrictive and consider rate cuts at the policy meeting in May.
Meanwhile, Abeeblahi Rufai of CardinalStone echoed this view, suggesting that falling inflation and proactive government infrastructure initiatives could create a positive outlook for the industrial sector in Q2.
“The government’s aggressive focus on infrastructure is likely to bolster the industrial goods sector in 2025, especially with strong fundamentals supporting the industry as a whole.”
In mid-December 2024, President Bola Tinubu announced a significant allocation of N4.06 trillion for infrastructure development as part of his 2025 Budget of Restoration.
He emphasized that this investment would act as a catalyst for growth in essential sectors such as energy, transport, and public works, which could significantly benefit industrial goods companies and drive substantial revenue increases.
What lies ahead
The NGX Industrial Goods Index is currently on a long-term buy trend in the Nigerian stock market, having reached a high of 5,637.83 points in January 2024.
However, much of 2024 saw declines that continued into January 2025, likely creating oversold entry points for buyers.
- Traditional oscillators such as the Relative Strength Index and stochastic oscillators indicate an oversold condition on the monthly timeframe, suggesting a potential rally.
- Additionally, momentum indicators like the Moving Average Convergence/Divergence (MACD) hint that an upward movement may be imminent.
If macroeconomic factors remain stable in the second quarter of 2025, the sector may see improved investment sentiment, potentially leading to a significant rally.
