Nigerian Stock Market on steroids, records highest daily gain in two years
The Nigerian stock market, which has been described by analysts in recent days as one that is on steroids, sustained its rally Monday, gaining N417 billion, its highest daily gain in two years, to cross the N11 trillion psychological barrier.
This is just as the Central Bank of Nigeria (CBN) paved the way for authorised dealers in the foreign exchange (FX) market to offset their excess foreign currency trading positions to other authorised dealers in the market without seeking the prior approval of the regulator. On the Nigerian bourse, market capitalisation rose from N10.845 trillion to close at N11.262 trillion, while the All-Share Index (ASI) recorded the daily highest gain in 23 months of 3.9 per cent to close at 32,578.38. At the close of trading, year-to-date growth rose to 21.2 per cent.
Monday’s rally was bolstered by Dangote Cement Plc, which added N290 billion to its value to close at N3.578 trillion, accounting for about 69 per cent of the gains recorded in the market. In all, Dangote Cement, which accounts for over 30 per cent of market capitalisation, has amassed N596 billion ($1.76 billion) in the first three trading days of June. The company’s shares, which galloped from N175 at the close of business on May 31 to N210 Monday, have effectively made Africa’s richest man, Aliko Dangote, who owns 91 per cent of the shares in the cement giant, N518 billion ($1.6 billion) in just three trading days.
A stockbroker, Mr. David Andori, expressed confidence that the rally being witnessed in the market would be sustained, given the positive economic indicators. “When an economy is in recession, investors move from equities to fixed income securities and when the economy begins to recover, investors move back to the equities market. That is what we’re seeing now. “Apart from occasional profit taking that we may see, the positive trend would remain for a significant period of time,” Andori said.
The market had surged N1.285 trillion, improving from N8.913 trillion at the end of April to N10.198 trillion at the end of May. The rally was triggered by the introduction of the new foreign exchange window for investors and exporters (I&E) by the CBN. Apart from the new FX window, analysts said investors were also responding to favourable economic conditions. “Looking at the strong growth in the unaudited results that quoted companies released for the period January-March 2017 and the improvement in the macroeconomic environment, we believe the equity market is ready for a recovery in 2017,” analysts at FSDH Research had said. According to them, the increase in dollar supply to meet the input requirements of manufacturing companies should increase output and revenue in the current financial year.
Meanwhile, as part of efforts to further deepen the FX market, CBN Monday paved the way for authorised dealers in the FX market to offset their excess foreign currency trading positions to other authorised dealers in the market without seeking the prior approval of the regulator. The central bank, in a circular, said all authorised dealers shall be subject to a maximum spread of N1, adding that funds purchased by an authorised dealer from another dealer on the interbank market shall not be held in position overnight by the buying authorised dealer or sold to another authorised dealer. The CBN, in the two-page document signed by its Director, Financial Markets Department, Dr. Alvan Ikoku, added: “Such interbank purchases shall only be sold by the buying authorised dealer to its customers for Permitted/Eligible Transactions as outlined in the above-referenced circular. All documentation requirements for Permitted Transactions shall apply. “Authorised dealers shall not exceed their respective foreign currency trading position (FCTPL) without approval of the CBN. Compliance with the FCTPL shall strictly be monitored by the CBN. “All interbank trades – spot, forwards, futures, option and swaps – that have an impact on an authorised dealer’s FCTPL are expected to comply with the rate reasonability standards.” In addition, the CBN pointed out that it reserves the right to intervene, as a buyer or sellers as it deems it fit in the interbank market. It advised the dealers to encourage their corporate clients to on-board the FMDQ-advised forex trading system immediately, in order to avoid sanctions and to deepen the market.
CBN also injected another $190 million into the interbank market Monday. A breakdown of the dollar sales showed the bank offered $100 million as wholesale interventions and allocated $50 million to the Small and Medium Enterprises (SMEs) FX window. Also, customers requiring forex for business/personal travel allowances, tuition and medical fees, among others, got $40 million. Confirming the latest injection Monday, CBN spokesman Isaac Okorafor said the bank was pleased with the performance of the naira, which has made tremendous gains against the dollar in recent days. According to him, the FX rates at both the inter-bank and BDC segments, had almost converged, prompting even greater optimism that the value of the naira will continue to spike.
The naira rose further against the dollar on the parallel market Monday, where it traded at N365, up from N369 to the dollar last Friday. Also reacting to market developments, Dangote at the weekend commended the performance of the CBN under Mr. Godwin Emefiele as its governor. Dangote said this when he spoke on Sunday night during the presentation of the 2017 Zik Prize Award for Leadership to Emefiele by the Public Policy Research and Analysis Centre (PPRAC), organisers of the award. Dangote highlighted the central bank’s intervention in the agriculture and real sectors of the economy, noting that they had been impactful. “The policies of the central bank contributed in saving the economy,” Dangote said. According to PPRAC, the CBN governor exhibited dexterity and resilience in managing the economy despite the recession. It pointed out that Emefiele’s singular courage, commitment and nationalist passion led to the conception and implementation of the CBN Anchor Borrowers’ Programme (ABP), which in just one full year added over two million tonnes of rice to the national output, created more than half a million direct jobs and was transforming rural lives in many states of the federation. Furthermore, the organisers of the awards pointed out that the CBN’s management of the FX market under Emefiele was worthy of mention. “At a time when other countries, notably Venezuela, Egypt and Angola, were reeling under the vagaries of galloping inflation and social strife due to severe exchange rate depreciation, occasioned by global commodity price collapse, Emefiele in a most humble, courageous, yet ingenious manner led the CBN to adopt creative and innovative strategies through which Nigeria has been saved from a certain disaster of currency failure and potentially debilitating hyperinflation that would have decimated the little income of Nigeria’s poor. “Under Emefiele’s watch at the CBN, Nigeria’s import substitution policy has acquired a new and irrepressible impetus with the slogan, ‘Produce what you eat and eat what you produce’. “Apart from food, this has found expression in different sectors of the Nigerian economy such as fashion, drinks, agricultural inputs, textile, leather products, etc,” PPRAC added.