By Chinwendu Obienyi
Despite the impact of the COVID-19 pandemic on the global economies, Nigeria’s stock market ended the year 2020 in impressive fashion as investors pocketed a gain of N8.09 trillion after increasing their buying pressure on bellwether stocks.
The equities benchmark index in Africa’s largest economy recorded its highest return, rising 50 per cent this year to become the world’s best performing stock market year-to-date (YTD).
The performance of the stock market in the first quarter (Q1) of 2020 had closed in the red with a negative return of 20.65 per cent while market capitalisation of the Nigerian Stock Exchange (NSE) which represents the market value of all listed companies, lost N2 trillion owing to the negative impact of the pandemic and sharp drop in oil prices.
However, the nation’s bourse bounced back in April and May 2020 with pundits attributing the positive performance to bargain hunting by investors (even though most of the trades were executed remotely) as well as earnings from quoted companies.
According to data obtained from the Nigerian Stock Exchange (NSE), transactions, which opened the business year at N12.958 trillion market capitalisation and 26.842.07 points All Share Index at the beginning of trading on January 2, 2020, closed December 31, 2020 at N21.056 trillion and 40,270.72 index points, earning a year-to-date gain of about N8.098 trillion or 50 per cent.
This meant that investors made a gain of N8.09 trillion in what has truly been an unusual year filled with uncertainties which made both foreign and local investors remain on the sidelines owing to upset in the market arising from the COVID-19 pandemic. However, sustained activation of business continuity process and other innovations by the Securities and Exchange Commission (SEC) and the NSE helped pull the market into positive territory.
Furthermore, the sharp drop in fixed income yields following further monetary easing by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) helped the performance of the market.
Speaking on the performance of the market, the Chief Executive Officer, NSE, Oscar Onyema, said, the year 2020 had been an eventful year for the Nigerian capital market and, specifically, for the NSE.
The NSE boss, who was represented by the Divisional Head, Shared Services at NSE, Bola Adeeko, during a digital Closing Gong Ceremony to mark the end of trading activities in 2020, noted that despite the economic impact of COVID-19, the exchange has remained resilient in providing stakeholders a platform to raise capital and invest.
“Despite the pandemic, the market capitalization of all securities listed on the exchange increased to N38.5 trillion as at 31 December 2020 from N25.89 trillion at the end of 2019. The NSE All Share Index crossed the N21 trillion mark with a YTD return of 50.03 per cent. We have also continued to provide a platform to support listed companies in meeting their strategic business objectives as demonstrated in the over N1 trillion raised by governments and corporates across various asset classes year to date”, he said.
On what to expect in the new trading year, analysts at Cordros Capital, said, In the first trading week of the new year, we expect the bulls to retain their dominance as buying activities due to positioning for Full Year (FY) 2020 dividends will likely suppress selling activities. However, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.
For their part, Afrinvest in an emailed note said, “We are optimistic about a sustained bullish run in the upcoming year although, we expect investors to take profit”.
