Emma Johnson
Sat, Sep 2, 2023 7:15 PM

The Nigerian Exchange Limited Emerges as one of Africa's Best-Performing Exchanges

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The Nigerian Exchange Limited Emerges as one of Africa's Best-Performing Exchanges
The Nigerian Exchange Limited (NGX) has emerged as one of the best-performing exchanges in Africa, gaining significant investor confidence despite concerns about inflation and weak macroeconomic indices. The market capitalization and All-Share Index have reached record highs due to positive sentiments and strategic positioning by investors. The new administration's policies are expected to boost corporate earnings and further strengthen investors' confidence in listed Nigerian corporates.

The Nigerian Exchange Limited (NGX) has positioned itself as one of Africa's top-performing exchanges, signaling strong investor confidence in Nigeria's stock market. Despite concerns about soaring inflation, interest rate hikes, and weak macroeconomic indices, the NGX has continued to experience positive sentiments and significant growth.

According to African markets, an online platform tracking the performance of exchanges across Africa, the NGX emerged as the second-best performing exchange during a 3-month duration. This success puts the NGX in a leading position among African exchanges, just behind the top-performing Ghana Stock Exchange.

This outstanding performance has propelled the Nigerian stock market to a 15-year high. The market capitalization value of equities listed on the NGX reached N36.422 trillion at the end of August, gaining a substantial N1.41 trillion from the beginning of the month.

The All-Share Index (ASI), which is a broad measure of Nigerian stock performance, also experienced significant growth. Starting the month at 64,337.52 index points, the ASI closed at 66,548.99 points, reflecting a gain of 2,211.47 basis points or 3.44%.

This bullish trend can be attributed to several factors. Investors have shown increasing interest in low, medium, and high-capitalized stocks across major sectors. President Bola Tinubu's new administration has introduced favorable policies such as the removal of fuel subsidies and the unification of the exchange rate, which have fueled investors' strategic positioning to take advantage of the record earnings posted by quoted firms.

Another significant contributor to the market's positive performance is the formation of the country's economic cabinet and executives. These initiatives have instilled confidence in investors and strengthened their belief in the Nigerian market's growth potential.

The market's sentiments, however, exhibited mixed patterns throughout the month. Market analysts at United Capital, in their H1 2023 review and H2 2023 outlook report, highlighted two key factors that have suppressed the real sector's development—elevated interest rates and foreign exchange losses.

Nevertheless, analysts expect the new administration's policies, particularly the unification of the exchange rate and advocacy for a lower interest rate environment, to boost the earnings performance of listed Nigerian corporates. This, in turn, will enhance investors' confidence, especially during earning seasons like H1-2023 and Q3-2023.

Reacting to the market's performance, analysts emphasize that investors, especially domestic investors, remain optimistic about the future shape of the Nigerian economy. Their optimism explains why the stock market is defying the prevailing macroeconomic uncertainties.

According to Cordros Research's market review and outlook report, titled "Veering from the watershed point," the resilience of the equities market reflects heightened investor optimism for domestic growth. The new administration's implementation of long-awaited policy reforms, coupled with accommodative monetary policies and resilient corporate earnings, has played a pivotal role in boosting buying activities in August.

Source of content: OOO News 2023-09-02 News

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