Nigerian equities suffered a significant mid-week setback, with investors losing a combined N648 billion as major stocks like Tantalizers (TIP) and Nigerian Real Estate Investment Trust (NREIT) led a broad market sell-off. The market capitalization of the Nigerian Exchange Limited (NGX) dropped to N56.2 trillion, down from the previous day's N56.9 trillion, reflecting a 1.1% decline in the All-Share Index (ASI) to 99,200 points.
Broad-Based Decline Across Key Sectors
The sell-off was widespread, affecting most sectors. The banking index fell by 1.5%, while the oil and gas index lost 0.8%. The consumer goods index also declined by 0.6%. TIP and NREIT were among the top losers, with TIP shedding 9.8% to close at N2.75 per share, and NREIT dropping 9.5% to N48.00 per share. According to analysts at Meristem Securities, the sell-off was driven by profit-taking after recent gains, as well as concerns over rising inflation and interest rates.
Investor Sentiment and Market Outlook
Investor sentiment turned negative as the market reacted to macroeconomic headwinds. The Nigerian Bureau of Statistics recently reported that inflation rose to 32.5% in June, putting pressure on the Central Bank of Nigeria to consider further rate hikes. A stockbroker at United Capital, who spoke on condition of anonymity, stated, “Investors are rebalancing their portfolios amid uncertainty about the direction of monetary policy. We expect the market to remain volatile in the short term.”
Trading volume was also affected, with about 350 million shares worth N8.2 billion traded, compared to 420 million shares worth N9.5 billion in the previous session. The decline in activity suggests cautious positioning ahead of key economic data releases. The negative breadth saw 28 stocks advancing while 32 declined, with NEM Insurance and MTN Nigeria among the few gainers.
Government Bonds and Treasury Bills
The sell-off extended to the fixed-income market, with yields on 10-year government bonds rising by 5 basis points to 18.2%. Similarly, yields on 364-day Treasury bills edged up to 22.5%. The bearish mood in the equity market has led some investors to seek safety in shorter-term instruments. However, analysts note that if inflation remains stubbornly high, the equity market could face further headwinds.
In the currency market, the naira remained stable at N1,590 per dollar in the official market, but pressure persists due to FX reserve concerns. The combined forces of inflation, currency volatility, and rising yields are expected to keep the equity market under pressure in the coming weeks.
