The Nigerian stock market recorded an unprecedented rally on Wednesday gaining N904 billion, as investors reacted positively to the peaceful conclusion of the presidential and National Assembly elections, and emergence of Major-General Muhammadu Buhari as winner of the presidential election.
The NSM, which shed 8.4 per cent in the first quarter of the year, regained all the losses yesterday, as investors swooped on highly capitalised stocks, which gained the maximum daily limit of 10 per cent.
Just as the NSE hit a record high, the naira also appreciated by N2 to close at N215 to the dollar at bureau de change outlets in Lagos, but remained unchanged at N197 to the dollar at the interbank segment of the forex market. Market capitalisation at the Nigerian STOCK EXCHANGE (NSE) gained N904 billion to close at N11.621 trillion, while the NSE All-Share Index (ASI) soared by 8.4 per cent, an unprecedented rally in the history of THE STOCK MARKET, to close at 34,380.14.
The value and volume of trading was equally high with investors staking N10.9 billion on 881.5 million shares.
Sixty-five stocks appreciated compared to only three that declined. Besides, 16 of the price gainers rose by over 10 per cent led by Dangote Cement Plc. Other major gainers included Lafarge Africa Plc, UAC of Nigeria Plc, Forte Oil Plc, Stanbic IBTC Bank Plc, Oando Plc, Guaranty Trust Bank Plc, Zenith Bank Plc, Nigerian Breweries Plc, United Bank for Africa Plc and FBN Holdings Plc.
“What we are seeing now will be the trend for the next few days as investors react to the successful elections and corporate results being declared. Many of the stocks have declined to record lows and now investors are taking advantage of those low prices,”
Meanwhile in the forex market on Wednesday, currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said the market was calm, even as he confirmed the naira’s gain in the parallel market. Ezun said the outcome of the presidential election was in line with analysts’ projections.
“The emergence of Buhari connotes positive market sentiment. A lot of people thought there would be post-election violence, but that phone call from President Jonathan completely changed the perception about Nigeria in the international market.
“Also, because of the fact that a lot of people anticipated that the dollar might fall, they are selling dollars and this is one of the reasons the naira is appreciating in the black market,” he explained.
The incoming administration led by Buhari has been advised to ensure improved collaboration between the monetary and fiscal authorities in economic management.
A report on Wednesday by Renaissance Capital Limited specifically noted that the collaboration would ensure that corruption, wastage and revenue leakages, among others, are tackled.
The report added: “Overall, our views are mixed on the implications of a Buhari victory for Nigerian banks. Investors see the asset quality risks but given where valuations are, they have been waiting for three things to justify a re-entry: a recovery in oil prices; fairer valuation of the naira, and some level of comfort on the political environment. Oil prices have recovered somewhat from their 2015 lows but remain a wild card.
“This coupled with how the election results are received, particularly in the South-south region, could in our view, provide further fillip to Nigerian banks’ share prices near term.
“We are not ignorant of the underlying asset quality risks in the system and multiple regulatory headwinds that have weakened the investment case for Nigerian banks over the past few years.”
It added: “On the asset quality front, however, we reiterate our view that the Nigerian banking system is in a much better place than in 2009.”