Business activities in Nigeria register slow growth amid cash shortages

By Dipo Olowookere

The desire to hedge against inflation has forced some investors back into the equity market, which has resulted in an increase in their participation in the landscape in the second quarter of 2022 compared to the first quarter of the year.

According to data from the exchange, in the second quarter of 2022, local and foreign investors traded N485.4 billion worth of shares on the Nigerian Exchange (NGX) Limited, compared to N346.4 billion traded in the first quarter. of 2022, indicating an increase of 40.11 percent.

It was also found that during the reporting period, traders bought and sold 54.3 billion shares, which is 143.83% more than the 22.3 billion shares traded in the first three months of the year. In the same vein, the number of transactions increased by 8.5% quarter-on-quarter to 320,778 transactions from 295,533 transactions.

The main attraction was seen to be some stocks with strong fundamentals as investors take positions in companies paying interim dividends as the market eagerly awaits half-year earnings from listed companies this month.

Due to buying pressure, the All-Share Index appreciated by 10.3% to 51,817.59 points in the second quarter of 2022 from 46,965.48 points in the first quarter of 2022, while the market capitalization increased to 27.94 trillion naira from 25.31 trillion naira.

While commenting on the trade data, Managing Director of Wyoming Capital & Partners, Mr. Tajudeen Olayinka, noted that improved liquidity in the system over the past six months is responsible for the positive performance of the Nigerian stock market.

Other factors driving liquidity in the equity market, he added, are “the instant payment of dividends to shareholders electronically (e-dividend), provides opportunities for immediate reinvestment of those dividends, particularly by institutional investors, who manage funds and portfolios for clients.

“That hasn’t left out other traditional investors, who have taken advantage of low prices, heading into the financial year-end rallies we saw in early 2022.”

He further attributed the buying interest to “negative real yield in the fixed income market and the need to hedge against inflation.”

According to him, “the stock market is an inflation-adjustment market, and so some investors who were prepared to hedge against inflation, regardless of the downside risk the market posed, decided to bring liquidity back to the stock market.”

“The ongoing crash in the crypto market has brought liquidity back into the equity market. It has been said that more Nigerian investors are actively participating in the crypto space, and thus, the sudden, albeit long-predicted, crash in this market has prompted some affected Nigerian investors to cut their losses, for less opportunity. volatile and recoverable in the stock market.

“The availability of derivatives is encouraging more institutional investors to embrace the equity market. Investors can now sell or buy the market at ease. All of these activities provide liquidity to the market,” Olayinka added.

Business post observed that during the reporting period, the value of fixed income securities on the stock exchange increased by 38.7% to 1.01 trillion naira from 728.9 billion naira in the first quarter of 2022.

According to NGX data, the volume of fixed income securities traded increased to 972,206.00 in Q2 2022 from 688,564 reported in Q1 2022, while its market capitalization jumped to 22.23 trillion naira from 21, 42 trillion naira.