Nigeria’s equities market closed the week on a bullish note, with the All-Share Index rising by 2.36 per cent to 246,992.42 points as strong gains in selected stocks lifted the market’s year-to-date return to 58.72 per cent.
The performance, reported in Coronation Asset Management’s Nigeria Weekly Update, also pushed total market capitalisation up by N3.73 trillion, or 2.40 per cent, to N159.56 trillion.
The latest rally reflects continued positive sentiment across key segments of the Nigerian capital market, although analysts noted that the sustainability of the trend will depend on stronger economic fundamentals, improved foreign exchange liquidity and continued investor participation.
Oil and banking stocks lead gains
The NGX Oil & Gas Index led sectoral gains during the week, advancing by 9.10 per cent.
The insurance index followed with a 3.85 per cent increase, while the pension and banking indices rose by 3.66 per cent and 3.58 per cent respectively.
The Consumer Goods Index gained 3.52 per cent, while the NGX 30 Index advanced by 2.42 per cent.
The NGX Industrial Goods Index was the only decliner, easing by 0.35 per cent.
At the individual stock level, Champion Breweries recorded the strongest gain among the highlighted performers, rising by 20.10 per cent.
Nigerian Breweries gained 18.80 per cent, Seplat Energy rose by 10 per cent and Aradel Holdings increased by 8.51 per cent.
However, the market also recorded significant declines in some stocks. Beta Glass fell by 17.38 per cent, Nascon Allied Industries declined by 15.90 per cent, Nigerian Aviation Handling Company dropped by 9.22 per cent, while RT Briscoe lost 13.16 per cent.
The mixed performance shows that although the broader market remained positive, investor interest was concentrated in selected companies and sectors.
FTSE Russell reclassification supports sentiment
Investor confidence may also have been supported by Moody’s revision of Nigeria’s sovereign outlook from “stable” to “positive”.
The revision reflects improvements in the country’s macroeconomic environment and could strengthen perceptions of Nigeria’s economic resilience.
The report also noted that FTSE Russell had added 31 Nigerian companies, including MTN Nigeria, Dangote Cement, First HoldCo, GTCO and Aradel Holdings, to its Frontier Index Series.
Nigeria’s reclassification from Unclassified to Frontier Market status is expected to improve the visibility of its equities among international investors.
The change is scheduled to take effect from the market open on September 21.
Analysts expect the reclassification to provide an additional catalyst for market sentiment, particularly among affected stocks, as investors position themselves ahead of the effective date.
However, the extent to which the development will generate additional foreign exchange liquidity will depend on the participation of international investors and the sources of their funding.
Crude oil prices rebound
The improvement in the equities market came alongside a strong recovery in crude oil prices.
Brent crude rose by 9.41 per cent during the week to close at US$96.28 per barrel, compared with US$88.00 per barrel in the previous week.
Its year-to-date gain consequently increased to 59.51 per cent from 44.60 per cent.
Nigeria’s Bonny Light also strengthened, rising by 11.12 per cent to US$102.54 per barrel from US$92.28 per barrel.
The increase was driven by renewed geopolitical tensions involving the United States and Iran, which raised concerns about possible disruptions to oil supplies from the Middle East.
Fresh US strikes on Iranian targets, including crude tankers, heightened fears of tighter global supply, while shipping activity through the Strait of Hormuz remained below normal levels.
Although Iraq increased exports and OPEC+ was expected to maintain its existing production policy, markets remained focused on the possibility of further escalation.
For Nigeria, stronger crude prices could support export earnings and government revenue, although the impact on the economy will also depend on production levels, oil theft, operating costs and the stability of foreign exchange inflows.
Naira appreciates as reserves cross $54bn
The naira also strengthened during the week, appreciating by 0.97 per cent at the Nigerian Foreign Exchange Market, NFEM.
The currency closed at N1,322.50 to the dollar on Friday, September 4, compared with N1,335.50 at the start of the week.
The naira reached N1,322.50 on Thursday and maintained that level at Friday’s close.
In the parallel market, however, the currency closed at approximately N1,400 to the dollar, compared with N1,390 previously.
This widened the premium over the NFEM rate to N68.78 from N62.71 in the previous week, indicating that a gap between the official and parallel markets remains.
The report noted that the naira’s appreciation occurred alongside lower foreign exchange market activity.
NFEM turnover through September 3 fell to approximately US$2.14 billion from US$3.19 billion in the preceding week, representing a 33 per cent decline.
This suggests that the recent currency strength should be monitored to determine whether it is supported by broad-based market activity.
Meanwhile, Nigeria’s gross foreign exchange reserves rose to US$54.08 billion as of September 3, crossing the US$54 billion mark for the first time since December 2008.
The reserves have increased by approximately US$8.6 billion since the beginning of the year, providing a stronger external buffer and supporting confidence in the Central Bank of Nigeria’s ability to manage foreign exchange pressures.
Financial markets face supportive outlook
Coronation Asset Management expects the naira to remain broadly stable in the near term, supported by stronger external reserves and relatively contained exchange-rate pressures.
The NFEM rate is projected to trade within the N1,300 to N1,350 range to the dollar, barring a significant deterioration in global risk sentiment, a sharp fall in oil prices or other adverse external shocks.
The report also expects the positive bias in the equities market to persist, with the upcoming FTSE Russell reclassification providing a potential additional boost.
However, analysts warned that sustained currency stability would ultimately require continued and broad-based foreign exchange liquidity rather than lower market activity alone.
Fixed-income market records strong demand
The fixed-income market also recorded notable activity during the week.
System liquidity rose by 28.98 per cent to N4.66 trillion, compared with N3.61 trillion in the previous week.
The increase was driven partly by month-end Federation Account Allocation Committee inflows and an Open Market Operation maturity of approximately N2.25 trillion.
The Debt Management Office’s Treasury Bills auction attracted N3.35 trillion in subscriptions against an offer of N750 billion.
The strong demand allowed the DMO to allot N865.71 billion.
The Central Bank of Nigeria’s OMO auction also recorded significant demand, with N2.88 trillion allotted against an offer of N1 trillion.
The strong subscription levels suggest that investors continue to show interest in naira-denominated fixed-income instruments, particularly as liquidity conditions remain relatively favourable.
The report expects the rally in the middle and longer segments of the bond market to continue, although movements at the short end will remain important to watch.
Overall, the combination of stronger equities, higher oil prices, a firmer naira, improved foreign exchange reserves and renewed sovereign confidence provides a supportive near-term backdrop for Nigeria’s financial markets.
Nevertheless, the report cautioned that the durability of the gains will depend on sustained liquidity, improved investment activity and continued progress in the broader economic environment.
