January 31, 2022/CSL Research

Based on the recently released NGX Domestic & Foreign Investment report for December 2021, the total value traded on the local bourse declined by 19.3% m/m to N158.3bn (US$363.8m) in December from N196.1bn (US$472.5m) in November. Similarly, since the local bourse lacked the visit of a Santa Claus rally in December, the broad equity index, All Share Index (ASI), returned a 2.1% m/m loss in December, despite the YTD gain of 6.1% at year-end. The decline in total transaction value was broad-based as both the domestic (-2.9% m/m) and foreign investors (-49.2% m/m) reduced activity level, with the latter shedding more weight than the former.

Institutional investors still largely dominated transactions at the domestic front, trading higher by 5.1% m/m to N85.2bn (US$195.9m) in December. Despite the marginal increase, total domestic transaction value was down 2.9% m/m to N122.9bn (US$282.6m) as the retail investors significantly reduced participation on the local bourse by 17.1% m/m to N37.7bn (US$86.8m). On the other hand, foreign investors have been net sellers of Nigerian equities for most of 2021, retaining apathy towards Nigerian risky assets. From a net outflow position of N3.3bn (US$8.0m) in November, it grew to N4.4bn (US$10.1m) in December, a fallout of higher foreign outflows of N19.9bn (US$45.7m) compared with inflows of N15.5bn (US$35.5m).

Looking ahead, 2022 began the year on a positive note as the euphoria that met the newly listed BUA Foods Plc spurred activities in the local bourse. Currently, the YTD gain stands at 8.2%, which is likely to maintain an upward trajectory in the short term. In our view, the ongoing release of favourable full-year numbers accompanied by dividend declarations will propel buying activities.