Nigeria’s stock market took a hit after its late October surge, losing about N3.52 trillion in market value as investors cashed out of stocks that had run hard. But the retreat did not turn into a full reversal.
By Friday, November 13, the Nigerian Exchange (NGX) All-Share Index had climbed back to 252,269.16 points, up 3,391.94 points, or 1.36 percent, from 248,877.22 points a week earlier. Market capitalisation recovered to roughly N163.80 trillion, adding about N2.20 trillion during the week.
That is still below the market’s recent peak. Capitalisation had reached N165.11 trillion on October 30 and N165.42 trillion on November 4, before the selling pressure intensified. Yet the market has held on to much of its October gains.
Between October 16 and November 13, the All-Share Index rose from 247,539.73 points to 252,269.16 points, a gain of 1.91 percent over five weeks. Market value increased from N160.73 trillion to N163.80 trillion, a rise of about N3.07 trillion.
A rally, then a reality check
In the week ended October 23, the All-Share Index slipped 0.13 percent to 247,222.27 points. The decline looked small on the surface, but market breadth told a different story, 55 stocks fell while only 20 gained. That was an early sign that the weakness was spreading beyond a handful of names.
The mood changed sharply in the final week of October. The benchmark index jumped 2.86 percent, adding 7,077.22 points to close at 254,299.49 points on October 30. Market capitalisation rose by about N4.60 trillion to N165.11 trillion.
Turnover also surged. Investors traded 7.619 billion shares worth N637.83 billion across 192,138 deals, compared with 2.024 billion shares valued at N110.77 billion the previous week.
But the activity was not evenly spread. Financial-services stocks, including First HoldCo, Access Holdings and Honeywell Flour Mills, dominated much of the trading. Large transactions, rather than broad-based buying, helped drive the headline numbers.
The rally extended into November 4, when the index touched 254,762.81 points and market capitalisation reached N165.42 trillion.
Read also: Dangote Refinery IPO draws nearly $1bn demand from African pension funds
Then came the pullback.
Investors began taking profits in stocks that had appreciated sharply. By November 6, the All-Share Index had fallen to 248,877.22 points, down 2.13 percent for the week. Market capitalisation dropped to N161.59 trillion.
The following week brought some of that value back. But the recovery has been uneven, and that is the more important point.
Between October 16 and November 13, the NGX Industrial Goods Index gained 18.56 percent, moving from 10,442.95 points to 12,380.99 points. That performance has done much of the work in supporting the broader market.
Banking stocks have gone the other way. The NGX Banking Index fell 6.62 percent over the period, from 2,532.47 points to 2,364.86 points.
Oil and gas also struggled, losing 4.19 percent. Consumer goods declined 2.51 percent, the Pension Index fell 2.61 percent, and the Main-Board Index slipped 1.76 percent.
Insurance showed a late recovery. After dropping from 1,079.57 points to 1,026.74 points over four weeks, the sector rebounded 4.44 percent in the final week to close at 1,072.30 points. It ended the five-week period down only 0.67 percent.
The market’s recent advance is being driven largely by a narrow group of industrial heavyweights, not by a broad return of buyer confidence.
That matters because an index can rise even when many stocks are still under pressure. Investors may be rotating into companies they see as better placed to defend their valuations, while stepping back from sectors where earlier gains look harder to justify.
Dangote Refinery changes the liquidity picture
The market correction is happening at the same time as preparations for the expected NGX listing of Dangote Petroleum Refinery and Petrochemicals.
The company’s public offer involved 4.1 billion ordinary shares priced at N525 each, with a potential gross proceeds target of about N2.15 trillion. The offer attracted strong demand, with reports indicating that applications came from investors within and outside Nigeria.
The timing matters. Investors committed large sums to the offer while the secondary market was already seeing heavy trading and, later, profit-taking.
Once allotments are completed, applicants who do not receive their full allocations should receive refunds. Some of that money may return to the secondary market and support demand for stocks that have corrected. But that is not guaranteed.
Investors could just as easily hold cash, move into fixed-income securities, or wait for a clearer entry point. A refund is not the same as a buy order.
A listing by Dangote Refinery would add a major industrial company to the NGX and expand the pool of large cap stocks available to institutional and retail investors. It could also change how portfolios are constructed, particularly for funds that track relevant market indices.
“If the refinery becomes eligible for index inclusion, fund managers may need to adjust their holdings. That could generate trading activity in the new listing and in existing heavyweight stocks, although the scale of any capital rotation will depend on actual investment decisions” said Emeka Soludo Portfolio analyst at Leonine investment.
The N2.15 trillion raised through the offer is not the same as the company’s market capitalisation. Its eventual value on the exchange will depend on the listing price and the total number of shares recognised for valuation. The free float portion actually available for public trading will determine its practical influence on liquidity and index weightings.
What comes next
The NGX has absorbed a N3.52 trillion selloff without giving up its upward trend. That is a positive sign.
But the market is no longer moving as one. Industrial goods are providing support, while banking, oil and gas, and consumer goods have found it harder to hold their gains.
The next phase will likely depend less on momentum and more on fundamentals, earnings, valuations, dividends and the ability of individual companies to justify current prices.
The Dangote Refinery listing could provide a fresh catalyst. It may bring a major new heavyweight to the exchange and release some subscription funds back into the market. But it will also test whether investors are willing to spread their capital more widely or continue concentrating it in a few large names.
For now, the NGX has shown it can withstand a sharp profit-taking episode. The harder test is whether the recovery can broaden beyond the industrial stocks that have carried it so far.
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