Investors anticipate strong Q4 earnings as NGX-ASI gains 1.38%

By Chukwuma Umeorah

The Nigerian equities market maintained its bullish momentum in the first week of February as investors positioned themselves ahead of the Q4 earnings season. The benchmark NGX All-Share Index (ASI) gained 1.38 per cent week-on-week (WoW) to close at 105,933.03 points, reflecting heightened investor confidence in corporate profitability and expectations of strong dividend payouts.

This rally translated into a significant increase in market capitalization, which rose by N883.5 billion, bringing the total market valuation to N65.592 trillion. Analysts attribute the rally to investors’ anticipation of robust corporate earnings, particularly from banking stocks and financial institutions, which have demonstrated resilience despite Nigeria’s challenging macroeconomic environment. “Looking ahead, the bullish momentum is expected to continue, driven by the release of more impressive earnings reports by listed companies,” noted analysts at Cowry Asset Management. They suggested that while short-term volatility may emerge, stocks with strong fundamentals remain well-positioned for long-term gains.

A review of the previous week’s performance on the local bourse showed that the banking sector played a major role in driving the market’s performance, with the NGX Banking Index emerging as the top gainer, rising by 4.66 per cent. Tier-1 banks such as Zenith Bank, Access Holdings, and FBN Holdings saw increased investor activity, collectively accounting for 1.176 billion shares valued at N38.469 billion in 9,506 deals. This represented 38.56 per cent of the total trading volume and 39.11 per cent of the total market value. The financial services sector overall remained dominant, recording 2.260 billion shares worth N52.190 billion, which contributed 74.08 per cent of the total equity turnover volume. Analysts believe the sector’s attractiveness is driven by expectations of robust earnings reports and continued monetary policy adjustments that support bank profitability.

Meanwhile, the equities market saw mixed performances across other sectors. While most indices recorded gains, the NGX Consumer Goods Index was the only index to decline, shedding 0.60 per cent in the review week. Price depreciation in key stocks such as Dangote Sugar, Nigerian Breweries, and Tantalizer weighed on the sector, as inflationary pressures and weaker consumer spending negatively impacted performance.

In contrast, the NGX Industrial Goods Index appreciated by 0.85 per cent due to renewed interest in manufacturing stocks, while the NGX Oil & Gas Index rose by 0.56 per cent, reflecting expectations of improved crude oil revenue for indigenous energy firms. The insurance sector also gained 1.61 per cent, supported by increased demand for risk-mitigation assets amid economic uncertainties.

Investor participation remained strong, with total weekly turnover reaching 3.051 billion shares worth N98.350 billion across 72,535 deals. This marked an increase in market value compared to the previous week, when 3.245 billion shares exchanged hands for N69.198 billion. The positive sentiment was further highlighted by a market breadth of 58 gainers against 34 decliners.

Among the top gainers were UPDC Plc, which led with a 38.50 per cent increase, followed by Eterna Plc, which added 32.79 per cent, and International Energy Insurance Plc, which gained 29.53 per cent. On the negative side, SUNU Assurances Nigeria Plc recorded the highest loss, declining by 12.87 per cent, while University Press Plc and Multiverse Mining & Exploration Plc each shed 10 per cent.

Despite the bullish momentum in the equities market, stakeholders warn that broader macroeconomic concerns, particularly regarding Nigeria’s declining GDP per capita, could dampen investor sentiment, thereby affecting the overall capital market performance in the long run. A recent report by the International Monetary Fund (IMF) showed that Nigeria’s GDP per capita had fallen to $835.49, marking its lowest level on record. This represents a decline of 74.08 per cent over the past decade, highlighting economic stagnation exacerbated by naira depreciation and rapid population growth.

Comparatively, Nigeria ranks among the lowest in Africa in terms of GDP per capita, trailing behind countries such as South Africa ($6,517.1), Morocco ($4,470.6), and Ghana ($2,189.3). IMF projections indicate that Nigeria may not surpass the $1,000 threshold until 2028, raising concerns about economic vulnerability and the need for urgent reforms.

Experts have recommended a more deliberate approach by the government to tackle these challenges. Chief Economist and Director of Research at the Nigeria Economic Summit Group (NESG), Olusegun Omisakin, said, “A GDP growth rate of 5.5 per cent is achievable if Nigeria continues with stability-focused reforms. However, inefficient policy implementation and economic constraints could limit growth to 3.4 per cent, and a reversal of reforms could see it drop to 2.7 per cent. The effectiveness of policy implementation in 2025 will be critical in determining whether Nigeria achieves its stabilisation goals or falls short.”

In addition to these challenges, stakeholders had emphasized the importance of addressing structural issues such as infrastructure deficits, unemployment, and low productivity to sustain long-term economic growth. They also highlight the need for diversification away from oil dependency, as fluctuations in global crude oil prices continue to pose risks to Nigeria’s fiscal stability.