January 22, 2025/CSL Research
Yesterday, we published our equities and fixed income outlook for 2025. We maintain a positive outlook for the year, driven by expectations of minimal Naira devaluation, improved macroeconomic conditions and gradual reduction in fixed-income rates. Furthermore, limited alternative investment options are likely to support continued market participation.
A more stable currency is anticipated to reduce foreign exchange losses, enhance corporate profitability, and boost investor confidence, thereby attracting greater FPI inflows. We project a base-case scenario in which the NGX All-Share Index (NGXASI) grows by 31.14% year-on-year (y/y), reaching 134,976.43 points by the end of 2025.
The market reached a historic milestone in 2024 as the Nigerian Exchange Group All Share Index (NGXASI) advanced by an impressive 37.56% year-on-year (y/y), closing at 102,926.40 points. This marked the fifth consecutive year of positive returns for the NGXASI and its first-ever breach of the 100,000-point mark. The NGXASI significantly outperformed global benchmarks in 2024, surpassing the Emerging Market Index (+5.05% y/y) and the Developed Market Index (+17.00% y/y).
It also remained attractively valued, with a price-to-earnings (P/E) ratio of 10.26x compared to 13.73x for the Emerging Market Index and 22.02x for the Developed Market Index. Domestic investors continued to dominate market activities, accounting for 84% of total transaction value as of November 2024. This strong local participation helped shield the market from external shocks and global financial contagions.
In 2025, growth is expected across key sectors:
• Cement: Federal infrastructure spending is projected to drive higher sales volumes
for cement manufacturers, improving profitability.
• Banking Sector: Ongoing recapitalization efforts are likely to stimulate market
activity.
• Telecom, Industrial, and Consumer Goods: Currency stabilization is expected to
reduce foreign exchange losses, benefiting large-cap companies in these sectors.
• Agriculture and Commodities: Listed agricultural firms are well-positioned to
capitalize on elevated commodity prices.
• Oil and Downstream Market: Downstream oil marketers stand to benefit from
reduced supply chain costs, bolstered by the Dangote Refinery’s contributions to
domestic fuel supply.
Within our coverage universe, many stocks remain attractively valued, and we maintain a buy recommendation on the following: Access Holdings, Zenith Bank, UBA, Guaranty Trust Holdings, Airtel, UACN, Unilever, Okomu Oil, Presco Plc, WAPCO, and Dangote Cement.
While the overall market outlook is positive, several risks could impact performance. Policies implemented by the Central Bank of Nigeria (CBN), such as windfall taxes, may pressure the profitability of the banking sector. Additionally, volatility in global oil prices poses a significant threat to currency stability. A decline in domestic crude oil production below current levels also remains a notable downside risk.
