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A Black October for the Lagos Bourse

The Nigerian Stock Exchange’s (NGX) performance declined dramatically last month after a fantastic run in H1 ’22, during which it outperformed its rivals on the continent.  In October, the NGX’s suffered its worst monthly return this year, shedding -10.6%, far worse than its counterparts, Nairobi (NSE 20) and Johannesburg (Joburg) stock exchanges which delivered returns of  6.5% and -3.8% respectively over the same period.   Following the hammering it took last month, the Lagos bourse’s year-to-date (ytd) return has now plunged to low-single-digits (+2.4%) from a peak of almost +27% in May. However, on ytd basis, its performance is still ahead of Joburg and Nairobi with returns of -8.5% and -11.7% respectively.

The exchange’s declining fortunes have been mostly caused by a sell-off in several of the bellwether firms that fueled its gain in H1 ’22.

The most notable name responsible for the NGX’s negative return last month was Airtel Africa, whose shares plummeted by c.-36% during the month. Its shares lost steam following a price correction on the shares.

The shares had rallied hard for most of this year, returning close to +119% due to demand from the offshore community because of its dual-listed status which suited their exit strategy.

Dangote Cement, another bellwether, saw its shares decline by almost -11% following a dispute with the Kogi State government over Obajana Cement plant, its largest production facility.

Seplat Energy and MTN Nigeria are two other notable names whose shares declined over the month because of investors’ profit-taking activity.

The additional rate hike of 150bps announced by the CBN’s monetary policy committee at its September meeting was another significant element that contributed to the waning investor confidence and the rotation of portfolios out of equities.

Looking ahead, we expect to see a muted performance for equities due to elevated yields on the fixed-income market and investors’ waning appetite for risk as the 2023 presidential election approaches.

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