So far this year, we have witnessed a clear case of divergence between the domestic and global equity markets. At the close of trading on Monday, the NGX-All Share Index (NGX-ASI) Year-to-Date (YTD) had returned 23.9% and is currently over the psychological 50,000-level for the first time since the 2008 crash, as opposed to the broad-based bearish performance experienced in other markets. For context, YTD performance across major equities market have been negative – S&P 500 (down 15.7%), Nasdaq (down 25.0%), India’s Nifty 50 (down 8.7%), Japan’s Nikkei 225 (down 7.8%), and China’s CSI 300 Index (down 15.6%). The bearish performance has been stoked by policy normalisation across the global economy as inflationary pressures have become the focus of monetary policy authorities.

At the forefront of the rally in Nigerian equities have been domestic investors who have executed 79.6% of all equity transactions on the local bourse YTD, according to data from the Nigerian Exchange. The uptrend has been particularly driven by domestic institutional investors whose investment options have now been somewhat limited to the equities market. Since the turn of Q2-2022, yields on domestic bonds have trended higher, causing Pension Fund Administrators (PFAs) to book mark-to-market losses (particularly those that mark-to-market their bond portfolios) on their bond positions (which constitutes c.60.0% of their portfolios). Meanwhile, alternative outlets like Fixed deposits and NT-bills have continued to remain unattractive. On the other hand, we have seen listed companies return solid results in the Q1-2022 earnings season. As a result, we have seen these institutional investors increase exposure to domestic equities, while reducing bond and other money market exposures.