March 23, 2022/CSL Research

The strong enthusiasm with which the year began appears to have cooled off as the recently released NGX Domestic & Foreign Investment report for February 2022 revealed that the total value traded decreased by 43.2% m/m to N183.6bn (US$441.6m) in February from N323.38bn (US$777.3m) in January 2022. Nevertheless, the All Share Index (ASI) returned a YTD gain of 11.0% in February from a 9.1% gain in January and even outperformed the prior year’s gain of 6.1%. The release of favourable results by sector bellwethers alongside dividend announcement helped renew buying activities on the local bourse.

While the foreign investors (+10.0% m/m) increased participation level on the local bourse, the impact was completely undone by a significant decrease in activity level by domestic investors (-51.0% m/m), leading to the decline in total transaction value. On the domestic front, the broad-based decline in activity level by both institutional (-58.9% m/m to N76.7bn; US$184.6m) and retail investors (-35.8% m/m to N61.4bn; US$147.7m) caused the fall in transaction value (-51.3% m/m to N138.1bn; US$332.3m). On the other hand, foreign investors increased activity level and narrowed the net selling position on Nigerian equities in February, albeit still retaining apathy towards Nigeria’s risky assets. The net outflow position narrowed to N3.7bn (US$8.9m) in February from N5.1bn (US$12.3m) in January.

The stronger growth (+15.2% m/m) in foreign inflows compared to the growth (+5.9% m/m)
in outflows, led to the contraction in the net outflow position.Interestingly, the start of the Russia-Ukraine crisis, which created uncertainty, prompting a rush to safety by investors with its attendant impact on the global equities market, appeared not to have had any real impact on the domestic equities market. The local bourse recorded a 1.7% m/m gain in February, while the global equities closed lower in the same period: US S&P 500 (-3.1% m/m), NASDAQ (-3.4% m/m) & DJIA (-3.6% m/m); and Europe STOXX 600 (-3.4% m/m), FTSE 100 (-0.1% m/m), and CAC 40 (-4.9% m/m). However, as the earnings season gradually comes to an end, the market is likely to go quiet. Moreover, the fact that emerging markets such as Ghana, Egypt, and South Africa have begun to hike rates reducing the carry trade opportunities for Nigeria may further dampen investors’ sentiments.

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