Despite the economic downturn in the year 2023, the Nigerian Exchange Limited (NGX) was able to come out with stellar performance, largely dominated by local investments, as the local bourse post yearly gain for the fourth consecutive year.
Amid double-digit inflation rate, the market capitalisation closed 2023 trading at N40.918 trillion, representing an increase of N13 trillion or 46.6 percent, from the N27.91 trillion it closed for trading in 2022.
Consequently, NGX All-Share Index (NGX ASI) hits an all-time high of 74,773.77 basis points, representing an increase of 45.90 percent Year-to-Date (YtD) gain from 51,251.06 basis points it opened for trading.
In 2023, the markets was been dominated by local investors as foreign investors are not looking at coming in due to currency instability. Basically, high-profile investments by billionaire investors such as Femi Otedola, Abdulsamad Rabiu, Tony Elumelu and Aliko Dangote have been pivotal, bolstering market confidence as their associated companies led the charge among top performers.
It was indeed an impressive year at the NGX as only 11 of the 156 listed stocks ended the year in negative territory, while 21 remained flat.
On the Nigerian local bourse, the star performer of the year was Transcorp Hotel, which posted an extraordinary gain of 654.39 percent in 2023, having closed at N8.66 Kobo per share as against N1.07 kobo it started the year.
Dangote Sugar also was the best performing stocks for the year 2023 as the share price of the company appreciated by 255.14 percent to settle at N57.45 per share. United Bank for Africa followed with 237.50 percent share appreciation to close at N25.65 kobo as against N7.61 kobo, while BUA Foods’ share value advanced by 197.54 percent to close at N182 per share, just as Access Holdings’ increased by 173. 35 percent to close at N23.15 kobo per share and Oando by 167.86 percent as the share price settled at N10.50 kobo.
The contribution of ‘Stocks Worth Over One Trillion’ (SWOOT) group significantly contributed to the market capitalisation gains. Except for BUA Cement, all eight members of this elite group posted double-digit gains.
In the year 2023, Zenith Bank and Guaranty Trust Holding Company also made their entry into the SWOOT, with gains of 61 percent and 76 percent, respectively.
Analysis based on sectoral basis indicated that the banking sector experienced significant rallies, particularly benefiting from gains linked to the devaluation of the exchange rate. NGX Oil and Gas was the best performer gaining 125.29 percent. NGX Banking followed closely with 112.51 percent increase; NGX Consumer Goods, 93.14 percent; NGX Insurance, 79.37 percent; NGX Pension, 79.20 percent and NGX Industrial Goods, 12.84 percent.
During the year, despite the performance, it was quite a tumultuous landscape as some companies exited the local bourse. These delisted companies withdrew over N224 billion from the NGX’s market cap in 2023.
In July, Ardova Petroleum finally delisted its shares from the floor of the local bourse. In a significant move within the energy sector, Ardova Petroleum Plc made headlines in July 2023 as it finalised the delisting of its 1.31 billion shares from the Nigerian Exchange Group (NGX). This move had been announced earlier in February when the company disclosed receiving an offer from its parent company, Ignite Investments & Commodities Limited, to acquire the shares held by minority stakeholders. The proposed buyout came at an offer price of N17.38 per share. Before delisting, Ardova Petroleum had a market cap of N21.5 billion.
Also in July 2023, Global Spectrum Energy Services, an oil and gas offshore support vessel servicing company, also delisted from the NGX, after beginning the process of delisting in June 2022.
The company, which provides marine support services, offshore security, escort services and offshore support vehicles, was listed on the NGX in 2007.
In November, Union Bank announced that it was at the final phase of the delisting process. This exit trimmed NGX’s market cap by approximately N193 billion.
Union Bank’s delisting after 52 years on the NGX unfolded following Titan Trust Bank’s (TTB) strategic acquisition journey.
TTB, securing an 89.4 percent stake by late 2021, swiftly increased ownership to 93.4 percent by June 2022, signalling a drive toward complete control. In May 2023, TTB’s bid for all remaining Union Bank shares at N7 each finalised total ownership.
Union Bank initially set the payout for minority shareholders at N7 per share but later increased it to N7.70 per share.
Capital Hotels, owners of Abuja Continental Hotel, are finalising their delisting from the NGX after suspending shares in November.
Setting up an escrow account via Cardinal Stone Registrars Limited, they aim to pay shareholders opting for the Exit consideration of N5 per share.
Despite undisclosed reasons for the delisting, Capital Hotels showed strong financial growth in 2023, with profits soaring by 168 percent to N502.7 million in nine months. As they prepare to delist, the NGX is expected to lose N9.5 billion in market cap.
Rak Unity Petroleum, the first Nigerian indigenous company to be listed on the NGX, concluded its liquidation process in November.
A statement released by Mrs Chinwe Chiwete, acting as the Liquidator, served as a formal notification to both the Nigerian Exchange Limited and the investing public regarding the conclusion of the members’ voluntary winding up of RAK Unity Petroleum.
Before embarking on the liquidation process, RAK Unity Petroleum Company had initiated a strategic five-year business plan in January 2016.
This ambitious plan was designed to bolster sales by focusing on the production of branded lubricants while simultaneously aiming to augment profit margins through strategic investments in the direct importation of Diesel. However, before liquidating, the company sold its physical assets to Asharami Synergy Limited.
Aside the aforementioned, some companies are in the process of delisting, and this process is expected to be finalised in 2024. These include PZ Cussons Nigeria Plc and GSK Consumer Nigeria Plc. Also, Oando Plc announced plans to delist from the NGX, however, the process has been stalled by a pending court case that has been on since 2021.
Speaking on the exits and delisting at the last Capital Market Committee meeting for 2023, the Director-General of the Securities and Exchange Commission, Lamido Yuguda, noted that the companies driving the market were not exiting but coming in.
“In the Nigerian market, the companies that are really driving the market in terms of market capitalisation are not exiting, they’re coming in and they’re coming in droves. What we need to do is given the size of the market capitalisation, we need to raise it higher. And that was that 50 per cent target. That is really what we need, to have more and more of these companies,” he noted.
On the bright side, the new listing on the Exchange in 2023 played a significant role on the NGX ASI all-time high record as the stock market continued on a positive trajectory.
In 2023, three newly listed equities in the NGX contributed about N179 billion to the exchange’s market cap.
On October 5, 2023, Chapel Hill Denham listed its N200 billion Nigeria Infrastructure Debt Fund (NIDF) with a market cap of N92.54 billion. However, as of December 14, it had declined to N92.46 billion.
The next day, October 6, VFD Group Plc was listed on the NGX with a market cap of N51.17 billion. The share has also since depreciated to N38.56 billion.
In November 7, Mecure Industries Plc with a market cap of N11.84 billion, was listed on the NGX. Since its listing, the share value has appreciated to N48 billion.
In 2024, while some companies are poised to delist from the local bourse, there are some likely listings, including Dangote Foods, Dangote Refinery and NNPLC.
Looking ahead, there are indications that the market’s positive trajectory would persist as investors position themselves favourably in dividend-paying stocks, anticipating the release of 2023FY earnings.
However, there are concerns over potential removal of selected Nigerian securities from the MSCI Frontier Markets Indexes, which could trigger sell-offs and potentially dissuade foreign investors.
“In 2024, focusing on stocks with robust fundamentals, particularly in the banking and oil and gas sectors, remains advisable. The factors driving gains in these sectors in 2023 are anticipated to continue influencing early 2024 performance,” analyst said.
As Nigeria’s financial market prepares to step into 2024, there is a sense of cautious optimism among investors and analysts.
While the NGX’s performance in 2023 showcased the resilience and potential of Nigerian equities, challenges such as inflation, currency volatility and security issues remain key factors that could influence market trends in the upcoming year.
For example, banking stocks are anticipated to face pressure due to a surge in fundraising activities. Banks are expected to bolster their share capital, potentially necessitating capital raises amounting to hundreds of billions.
As global and local economic conditions continue to evolve, the Nigerian stock market’s ability to sustain this growth trajectory will be closely monitored.
The remarkable gains of 2023, however, have set a high benchmark and renewed confidence in the Nigerian financial sector’s resilience and potential for growth.
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