AMID THE ELIMINATION OF SUBSIDIES AND THE FX CRISIS, THE CAPITAL MARKET CONTINUES TO RISE

Given that the Nigerian equities market has exhibited a bullish tendency for the most of the year, investors have found 2023 to be a favorable year. Identifies a few of the key elements influencing industry trends in 2023.

The Nigerian Exchange Limited broke with the pattern last year, earning a 19.98% return, after closing unfavorably in the years before the elections in 2015 and 2019. Despite the uncertainties that surrounded the general elections of 2023, it has continued its pattern this year.

The market reached N30 trillion in capitalization on the first trading day following the presidential election on February 25. A significant achievement that, according to analysts, demonstrated local investors' confidence in the presidential candidate's ideas.

The market reached N30 trillion in capitalization on the first trading day following the presidential election on February 25. A significant achievement that, according to analysts, demonstrated local investors' confidence in the presidential candidate's ideas.

In line with the experts' viewpoint, Tunde Amolegbe, Managing Director of Arthur Stevens Asset Management Limited, stated, In the past two election cycles, in 2015 and 2019, the market closed down. But the market deviated from the usual pattern for the 2023 elections. Since inflation was the only place where positive real returns could be achieved when accounting for potential holding period returns, the market remained bullish even after the elections.

There is also the belief that the market will benefit from the election of any one of the top three presidential contenders since they will all perform better than the outgoing administration. In actuality, the stock market remained optimistic until the results were announced and even after the elections.

In addition to the market's peculiar reaction to the election results, investors increased their exposure to the equity market due to its greater returns than the fixed-income market in response to rising inflation.

CORPORATE INCURSIONS

The market was alerted to the news that billionaire Femi Otedola had acquired roughly 5.52% of Transnational Corporation Plc, just before the audited 2022 financial reports of listed firms were released.

Although the minority shareholders and the corporation applauded the acquisition of shares, he quickly sold them Tony Elumelu, the chairman of Transcorp. It was also a premonition of what was to come a couple of weeks later.

On July 7, the Nigerian Exchange Limited witnessed a historic exchange when a business connected to Oba Otudeko, the former chairman of FBN Holdings, purchased more than four billion shares of the financial institution.

A lot of market reactions were generated by the acquisition, and the Securities and Exchange Commission said that it was looking into the transaction. As of the conclusion of the third quarter, FBN Holdings' books had not yet adjusted for this transaction.

REMOVAL OF FUEL SUBSIDIES AND HARMONIZATION OF CURRENCY

President Bola Tinubu declared in his inauguration address that the fuel subsidy program would terminate and that the Central Bank of Nigeria would be given instructions to address the foreign exchange crisis.

“The fuel subsidy is gone,” he declared upon taking office as the 16th President of Nigeria.

In order to boost the economy, Tinubu stated that his government will instead direct funding toward infrastructure and other areas, promising a “unified exchange rate” during his tenure. Additionally, he pledged to restructure the economy to promote growth and raise the GDP by creating jobs.

Fuel prices have nearly tripled as a result of this legislation, driving up transportation expenses. Millions of homes and small companies that depend on gasoline generators for power because of erratic grid supply have also been affected.

Positive effects were seen by listed oil businesses on the stock exchange, as their revenue rose during the first half of 2023. Another contributing aspect was the rising demand for fuel on a worldwide scale.

The average retail price that customers paid for gasoline in June 2023 was N545.83, according to the National Bureau of Statistics. This is a 210.32 percent increase over the N175.89 average in June 2022.

The apex bank declared the harmonisation of the currency market segments, leading to the floating of the naira, on the front of foreign exchange, which was one of the reasons that international investors left the Nigerian market. Stakeholders applauded the decision, but there were reservations about how it would be carried out. Johnson Chukwu, the Managing Director of Cowry Asset Management, stated, “The level of thought process that went into the reforms is the key thing that is missing.” There hasn't been any stability in the currency rate. The degree of stability is more important to economic actors than the actual exchange rate.

Nine companies lost N960.18 billion in the second quarter as a result of the new forex regulation, and further losses are anticipated.

The sharp devaluation of the naira that followed the CBN's attempt to narrow the difference between the official and parallel rates of the naira had a severe effect on the companies' businesses, according to their half-year financial reports.

In the first half of 2023, a number of companies reported foreign exchange losses totaling N960.18 billion, including MTN Nigeria Communications Plc, Airtel Africa Plc, Dangote Cement Plc, Dangote Sugar Refinery Plc, Nestle Nigeria Plc, MRS Oil Nigeria Plc, Guinness Nigeria Plc, Nigerian Breweries Plc, and Seplat Energy Plc.

Gains for banks, however, prompted the central bank to issue a regulation prohibiting them from applying the forex revaluation gains to their operations in order to prevent exacerbating the nation's foreign exchange crisis. Right now, the local money is still having trouble settling down.