Improvement in Equity Market Activities

E kaaro o, Ututu Oma, Barka da Safiya - Good morning, and a warm welcome to ThinkBusiness Nigeria, your Monday – Friday dose of commentary, contexts, and insights on business and economic news that matter to you.

Nigeria is going through severe economic strain. We knew it was bad, but a new government has shown that it was worse than we thought. It’s likely to get worse before it gets better.

But every day, I wonder why it is so difficult to deal with what I consider the greatest cause of the strain – oil theft.

The inability to deal with oil theft and the vast minerals theft in the North is the greatest indication of Nigeria’s failure in over 60 years.

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Markets

• The benchmark NGX All-Share Index (ASI) moved up 592.47 (0.9%) points to close at 66,151.38, representing a week gain of 1.46%, 4-week gain of 2.82%, and an overall year-to-date gain of 29.07%. Dangote Sugar Refinery led the gainers with 10% share price appreciation closing at NGN 52.25 per share, followed by Transcorp Nigeria (+10%), Thomas Wyatt Nigeria (+10%) and Omatek Ventures (+10%).

• Oil was down on Monday. Brent crude down 65 cents, or 0.15%, to $84.3, U.S. West Texas Intermediate crude gained 45 cents, or 0.6%, to $80.28.

• Naira was strengthened at both the I&E Window and on the streets. At the I&E exchange, Naira appreciated by 0.77%, closing N772.12 to the US dollar. On the streets, Naira was up by 1.41%, with a value of N907 to the US dollar.

• U.S. natural gas futures largely remained flat, up by 0.39%.

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National Headlines

• Back to the market – There has been marked improvement in equity market activities in the last few months, especially following the twin reforms of removal of fuel subsidies and the aggregation of all exchange rate windows into one. Latest data shows transactions in Nigeria’s equities market surged to N702.9 billion in July 2023, a 72.83% surge compared to the N406.75 billion recorded in June, and 594.78% compared to the same period last year. (See News Analysis).

• We can’t grow enough food – While funding for agriculture has risen dramatically in the last decade, Nigeria can’t grow enough food to feed its over 200 million people, late data shows. Between 2018 and 2022, Nigeria recorded food trade deficits of about N5 trillion. The increase in the value of food imported increased by 121% over a 5 year period, N1.9 trillion compared to N857 billion in 2018.

• Nigeria Reserves down near US $ billion in two months – Nigeria’s external reserves dropped by US $915m after the Central Bank of Nigeria’s aggregation of all exchange rate windows into the I&E exchange, data shows. The level of reserves was US $34.66 billion June 14^th when the Naira was devalued, now US $33.74 billion on August 24. Since then, Naira has lost additional 30% on the back of stampede out of the country by international businesses, local businesses and Nigerians, all meeting varied needs. Both demand and supply for US dollar are inelastic, not responding to changes in prices.

Global Headlines

• Canada’s GDP to show a sharp slowdown – According to Reuters, Canada's sQ2 2023 GDP data due on Friday is expected to show a sharp slowdown in economic activity of 1.1% compared to 3.1% of Q1 2023. This will weigh on the Central Bank’s meeting on September 6^th .

News Analysis - Back to the Market

In July 2023, the total value of transactions on the Nigeria's equities market surged to N702.9 billion, marking a significant increase of 72.83% compared to the N406.75 billion recorded the previous month. The Domestic and Foreign Portfolio Participation in Equity Trading report published by the NGX provided these figures.

In July 2022, it was N101.1 billion, showing a remarkable year-on-year increase of 594.78% in the equities market. This surge follows the twin reforms of the removal of fuel subsidies and the aggregation of all exchange rate windows into the I&E. However, foreign transactions experienced a slight decline of 11.37%, dropping from N45.74 billion (approximately $60.49 million) in June to N40.54 billion (approximately $52.58 million) in July, signaling that further reforms and improvement in the business environment are required.