In the recent dynamics of the Nigerian Autonomous Foreign Exchange Market (NAFEM), a significant devaluation of the naira by 22.1% has been observed, bringing the exchange rate to N996.75/$. This depreciation coincided with a 7.4% reduction in total turnover, which reached $545.89 million. Notably, transactions occurred within the range of N700 and N1,100/$, providing a contextual backdrop for the market’s activities.
There’s been a notable downward trend in exchange rates over the past month. The rates have declined by 9.9% to N873.59/$, with similar trends observed in three-month (-10% to N890.19/$), six-month (-10.3% to N918/$), and one-year (-9.5% to N969.18/$) periods. These fluctuations in exchange rates reflect the intricate dynamics of the foreign exchange landscape, naira.
Analysts from Cordros Capital reacted to these developments, expressing an expectation of a moderate improvement in FX liquidity conditions. However, they cautioned that despite this anticipated improvement, the conditions might still be considered frail compared to historical levels. The analysts pointed to the Central Bank of Nigeria’s (CBN) recent actions in the FX space as an indication that FX reforms are regaining momentum. The efficacy and sustainability of these actions will likely play a crucial role in determining the trajectory of local currency pressures.
The analysts also highlighted the watchful eyes of foreign investors on the FX space, particularly in anticipation of the promised FX inflows from authorities, the CBN’s efforts in clearing FX backlogs, and the clear direction of short-term interest rates. These factors underscore the delicate balance that needs to be maintained for a stable and attractive foreign exchange environment, naira.
Shifting focus to the equities market, a turnover of 2.5 billion shares worth N45.3 billion was recorded in 32,815 deals. This contrasts with the previous month, where a total of 2.5 billion units valued at N40.6 billion were exchanged in 37,959 deals. The financial services industry took the lead in terms of volume, contributing 66.44% to both total equity volume and value.
The breakdown of activities in the equities market revealed the dominance of the financial services industry, followed by the oil and gas sector and the ICT industry. Notably, the top three equities – Japaul Gold and Venture Plc, FBN Holdings, and United Bank for Africa Plc – accounted for a substantial portion, contributing 40.8% to the total equity turnover volume, naira.
Examining price movements, the market experienced gains on all trading sessions, propelled by increased demand for specific stocks such as BUA Cement (+6.5%), FBNH (+12.4%), and Seplat (+3.9%). This positive momentum reflected in the all-share index (ASI) and market capitalization, appreciating by 0.9% to close the week at 70,849.38 and N38.925 trillion, respectively. These gains translated into Month-to-Date and Year-to-Date returns of +2.3% and +38.2%, respectively.
Despite the overall positive market sentiment, certain indices, such as NGX Insurance, NGX AFR Bank Value, NGX MERI Growth, and NGX Sovereign Bond, experienced depreciations ranging from 0.53% to 2.25%. In contrast, the NGX ASeM index closed flat, naira.
Sectoral performance displayed a mixed picture, with the oil and gas (+2.9%), industrial goods (+2.7%), and banking (+1.2%) indices recording gains. On the other hand, the insurance index depreciated by 0.5%, reflecting the nuanced dynamics within different sectors.
Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, noted that investors increased buying interests in equities as a hedge against high inflation, supporting companies’ performances. This trend, reflected in the latest scorecards, is expected to contribute to dividend payouts, influencing share prices, naira.
In light of the mixed bag of rising fixed-income market yields, Omordion emphasized the continued influence on portfolio management, rebalancing, and readjustment. He suggested considering undervalued stocks, sector rotation, and opting for defensive stocks during insider playing opportunities.
Looking ahead, Cordros Capital projected a week marked by profit booking across most counters, anticipating a “choppy theme.” Institutional investors are expected to seek clues on the direction of yields in the fixed-income market. The advice for investors is to focus on fundamentally justified stocks, recognizing the challenges posed by the weak macro environment, naira.
Vetiva Dealings and Brokerage also provided insights, characterizing the week as positive with decent gains in most sectoral indices. However, they anticipated profit-taking activities dominating the market early in the week, with potential resumption of bargain hunting in later sessions.
In terms of market breadth, 37 equities appreciated during the week, a decrease from the 63 equities in the previous week, while 43 equities depreciated, marking an increase from the 29 in the previous week. Additionally, 75 equities remained unchanged, higher than the 64 recorded in the previous week.
Beyond equities, Exchange Traded Products (ETPs) saw 32,861 units valued at N4.45 million traded, indicating investor interest in these financial instruments. Similarly, 62,233 units of bonds, valued at N65.981 million, were transacted in 16 deals. This highlights the diverse range of financial instruments being actively traded in the market.
Conclusion: Naira
As the financial landscape continues to evolve, these intricate dynamics underscore the need for investors to stay informed, navigate market uncertainties, and make well-informed decisions to navigate the ever-changing terrain of the Nigerian financial markets, naira.
