2022 wrap on the markets
Nigerian Stock Market
The equities market in Nigeria had a good time last year with increased activities compared to the year before (2021). Let’s talk some numbers!
The market rallied by 19.98% which was higher than 2021’s 6.07%. A total of 201.99 billion units of shares were traded (FY2021: 174.24 billion units) and valued at N2.34 trillion (FY2021: N1.91 trillion).
The year however was not all roses, the economy as a whole was impacted by slowed growth, reduced foreign investment, currency depreciation, and high inflation rate among others. We also witnessed a series of increases in the interest rates in the bid to combat inflation that drove investment traffic from the equity market to the debt market. Despite this, we still see major companies and sectors having gains.
The oil and gas, growth, and industrial goods indices gained 34%, 42% and 20% respectively. While the insurance, consumer index and CG index declined by 12%, 0.06% and 0.12% respectively.
Another interesting sector is the banking sector, which had a marginal gain of 2.81% but WEMABANK alone had its share price appreciation through the roof at 441.7%. WEMABANK was also adequately rewarded for its performance by being introduced to the NGX 30. The NGX 30 is an index that tracks the top 30 companies in terms of market capitalization and the total equity value. We had other amazing winners in the market as well, inclusive of Multiverse Mining & Exploration (1890% share price gain), Meyer PLC (393.5%) and others.
WEMABANK’s gain was majorly driven by solid increase in gross earnings and after tax profits, this is similar to what we see in the financials of Multiverse Mining & Exploration. Both companies had stellar financial performance as seen in the published half year reports.
So what?
It is vital for investors to understand that in the midst of economic downturn, there are still opportunities for value investing and such opportunities lie with companies that have strong balance sheet, low debt, and good cash flows.
However, there are several events we see shaping the markets in 2023 which includes the general elections, international oil prices, the US Fed policies, Nigerian capital market plan implementations, the expansionary budget and several others.
These events are likely to have impact on investor confidence. To benefit from the market this year, certainly hedging against exchange rate and inflation fluctuations would be important.
Finally, the best approach to the markets is always a long view.