March 1, 2022/CSL Research

The recently released NGX Domestic & Foreign Investment report for January 2022 revealed the enthusiasm with which the year began as the total value traded increased by 104.3% m/m to N323.4bn (US$777.3m) in January 2022 from N158.3bn (US$363.8m) in December 2021. The increased activity level (48-month high) mirrored the January rally on the back of positive corporate actions. The broad equity index, All Share Index (ASI), returned a 9.1% m/m gain in January, even outperforming the prior year’s gain of 6.1%. One, investors cheered the listing of BUA Foods Plc’s shares, which caused a significant gain in the share price, up as much as 61.0% as of the end of the month. Likewise, prospects associated with the sustained increase in crude oil prices renewed investors’ interest in Seplat Plc. Among other positive factors was the inclusion of Airtel Africa Plc on the FTSE 100’s index, seeing the stock benefit on the local bourse due to its dual listing status to become the most capitalized stock on the exchange.

The increase in total transaction value was broad-based as both the domestic (+129.4% m/m) and foreign investors (+17.0% m/m) increased participation level. On the domestic front, transaction value more than doubled, rising by 129.4% m/m to N282.1bn (US$678.0m), stemming from increased activity by institutionals (+118.9% m/m to N186.5bn; US$448.3m) and retail investors (+153.2% m/m to N95.6bn; US$229.7m). On the other hand, though foreign investors also increased activity level, they maintained a net selling position on Nigerian equities, retaining apathy towards Nigeria’s risky assets. The net outflow position grew to N5.1bn (US$12.3m) in January from N4.4bn (US$10.1m) in December, a fallout of higher foreign outflows of N23.2bn (US$55.8m) compared with inflows of N18.1bn (US$43.5m).

In contrast to the bearish sentiments that filled the global equities market, the Nigerian market started 2022 on a bullish note. From a gain of 9.1% in January, the YTD gain currently stands at 11.0%, benefiting from the ongoing release of favourable full-year numbers accompanied by dividend declarations. Looking ahead, we expect the activity level to remain high in February. First, the continued rise in oil prices makes a strong case for investors to continue to show interest in companies such as Seplat Plc. Also, we believe investors will continue to take positions in high dividend-paying stocks, especially as fixed income yields remain low.