02 April 2015, Lagos –
The Nigerian stock market recorded its biggest rise in a day on Wednesday as investors scrambled to buy stocks following the declaration of Gen. Muhammadu Buhari of the All Progressive Congress as the winner of the presidential election and the concession of defeat by President Goodluck Jonathan.
At the close of trading, the market capitalisation of the listed equities surged by N904bn or 8.4 per cent from N10.717tn on Tuesday to N11.621tn, with the Nigerian Stock Exchange All-Share Index also rising by 8.4 per cent or 2,635.32 basis points to close at 34,380.14 basis points.
It was the biggest gain recorded by any Exchange all over the world so far this year, the closest being a five per cent gain by Chinese stocks earlier in the year.
According to market operators and experts, the peaceful conduct of the presidential election and, particularly, the acceptance of the result by Jonathan, which has set the stage for a peaceful transition, are responsible for the record performance of the stock market as it has greatly boosted investor confidence.
Wednesday’s gains were spread across all the sectors with all of the five NSE sectoral indices surging as well.
The NSE Industrial Index, for instance, soared by 9.8 per cent to 2,117.71 basis points; followed by the NSE Banking Index, which jumped by 8.9 per cent to 396.50 basis points.
The NSE Oil and Gas Index and the NSE Consumer Goods Index rose by 7.34 per cent and 7.24 per cent to close at 407.98 basis points and 862.81 basis points, respectively.
An economist and Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said the performance was because the uncertainties surrounding the elections, which made several investors to exit the market and caused others to trade cautiously, had been removed.
“Investors don’t like uncertainties, they like good news and the uncertainty is over and the good news is here. The victory (of Buhari) is good for the market,” he said.
He, however, said the level of gains recorded was unlikely to be sustained because the market was not yet in a positive territory, rather it was just recovering the losses it had made.
The Chief Executive Officer, Enterprise Stockbrokers, Mr. Rotimi Fakayejo, who said the market had never gained up to six per cent in a day, explained that everybody was excited and expected things to get better.
“It has never happened before,” he enthused.
Apart from the peaceful conduct of the elections, the immediate past President, Chartered Institute of Stockbrokers, Mr. Ariyo Olushekun, said the jump was also due to the confidence people had that Buhari would turn things around for the better.
Stressing that the gains were indeed historic, Olushekun said, “The way markets work, it is difficult to get such a jump in one day…That is a sign that confidence is returning.”
On the attraction of the stocks, he explained that many of them were trading well below their intrinsic value because people were concerned about the elections, insecurity and declining exchange rates, which caused them to dump stocks.
“But with this election, that issue of instability has been taken care of and I believe people have a lot of confidence in the President-elect. A lot of people expect him to take care of Boko Haram and corruption,” Olushekun said.
Foreign portfolio investors had pulled out over N1tn from the Nigerian stock market in 2014 due to concerns about the elections, insecurity and the general state of the economy.
While some of them are believed to be planning to re-enter the market following the elections, the Managing Director and Chief Executive Officer, Cowry Asset Management, Mr. Johnson Chukwu, said Wednesday’s gains were mainly due to the reaction of domestic investors as foreign investors that exited were likely going to wait to get some clarity about a lot of things such as the economic policies of the incoming administration before re-entering the market.
Chukwu, who said that only three stocks recorded losses for the day compared to 65 gainers, acknowledged that the mood of the market was exuberant.
“We saw a lot of local retail investors coming to the market, scrambling for whatever is available in the market because they just feel that the pain of political uncertainty has been lifted from the country and people are even quite optimistic that the incoming government will address all the problems of the country,” he said,
He, however, stressed that while the country had solved the critical problem within the political environment, there were grave problems facing the economy.
“The economic fundamentals have not changed one bit. The reserves have gone to $29.79bn; average crude price is about $62; demand for the crude by the major importers is declining; production is not likely to increase overnight, so your foreign reserves will keep depleting,” he stressed.