THE Nigeria Stock Exchange (NGX) has surrendered its pole position to South Africa’s Johannesburg Stock Exchange (JSE) on the back of a lacklustre performance by the forme.In April, NGX posted the largest loss of the three stock exchanges that FBN Quest tracks on the continent, shedding 4,5 percent month-on-monthcompared with a 2,8 percent m/m gain by its South African counterpart.
Kenya’s Nairobi Stock Exchange (NSE) posted a m/m decline of 2,7percent.FBN noted thus JSE has extended its lead since it overtook the NGX in April, delivering a year-to-date (ytd) gain of 7,1 percent.In contrast, the NGX’s underperformance during the month saw its ytd performance shrink to 2,2 while Nairobi extended its ytd loss to 5,8 percent.
“The lacklustre performance of the NGX in April can be attributed to two main reasons,” FBN stated.It mentioned first the decision by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to raise interest rates by 50 basis points (bps) in March, which took the policy rate to 18 percent, played a significant role in driving investor interest toward fixed-income instruments with higher yields.
“Secondly, weak fourth quarter 2022 results by some top tier Nigerian banks, due to significant impairments on investment securities mostly related to Ghana sovereign debt, negatively impacted investor sentiment towards bank stocks, leading to a decline in their share prices.”
The first quarter 2023 results of some non-financial companies within FBN’s coverage also showed weakness in sales and earnings yearly due to the cash crunch associated with the CBN’s naira redesign policy and election uncertainties during the period.
The high-interest rate environment also had a notable impact on various non-financial firms, causing a surge in their interest expense, according to the market watcher.FBN noted the first quarter 2023 results of banks, which are currently benefiting from the elevated interest rate environment, may have a
positive impact on the NGX in the near term.
“However, the overall performance of the Lagos exchange is expected to be influenced by the policy direction and reform agenda of the new administration.” Bola Tinubu is to be sworn-in as president later this month but his rivals have disputed the results of the February 25 elections.
– CAJ News
