The Nigerian equities market showed resilience in May, posting a marginal gain of N619 billion despite the Central Bank of Nigeria’s (CBN) ongoing interest rate hikes. This represents a significant turnaround from April when the market saw a 6.16% decline and a loss of over N3.5 trillion in value after the CBN increased the monetary policy rate (MPR) by 200 basis points to 24.75%.
The hike had led investors to shift their assets to the fixed income market. However, positive first-quarter earnings reports and bargain hunting activities helped the market achieve a 1.1% return, even with a further 150 basis points increase in the MPR to 26.25%.
The Nigerian Exchange Limited’s (NGX) All Share Index (ASI) rose to 99,300.38 points at the end of May from 98,225.63 points at the start of the month, reflecting a 1.1% increase. Similarly, market capitalization increased to N56.172 trillion from N55.553 trillion, also a 1.1% rise. The banking and oil and gas sectors were notable beneficiaries, with their indices climbing by 2.98% and 2.1%, respectively. Analysts attributed the gains to impressive Q1’24 earnings and strategic bargain hunting by investors.
Looking ahead, analysts predict a mostly bearish market in June due to the high-interest rate environment and increased activity in the primary market driven by the banking sector’s recapitalization efforts. Victor Chiazor, Head of Research at FSL Securities, noted the equities market’s bearish trend since the CBN’s hawkish stance led to a 750 basis points increase in the MPR over four months.
Source: Vanguard