One day after the swearing-in of Nigeria’s new President, Bola Ahmed Tinubu, the financial markets have responded bullishly as Nigeria’s Eurobonds gain, while the Nigerian Stock Exchange (NGX) posts a 5.2% gain.
In the bonds market, the bonds that are set to mature in 2047 saw a significant increase of 3.3% to reach a value of 66.750 cents on the Dollar. Similarly, the bonds maturing in 2049 experienced a gain of 2.9%, and the ones due in 2051 advanced by 3.5%.
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Furthermore, on Tuesday, the Nigerian Stock Exchange witnessed a strong rally with a gain of 5.2%. This positive momentum was observed across all the indices, including NGX30, NGX Banking, and NGX Industrial, as they all recorded significant gains. Moreover, the market capitalization of the All Share Index surpassed the N30 trillion milestone, reaching a value of N30.35 trillion.
The total number of deals reached 9,916, which is an increase of 56.38%. This suggests that investors were feeling optimistic about the market. Additionally, the total volumes traded saw a significant increase of 133.5%, while the market turnover rose by 10%. In the local equities market, the top 5 traded stocks were Access Holdings, FBN Holdings, Transcorp, UBA, and GTCO.
While it’s easy to attribute the behaviour of the market to the signs of the incoming administration, some experts attribute it to a myriad of other factors.
According to Abiola Gbemisola, an Equity Research Analyst with FBNQuest,
“The market is sometimes too complex to attribute movements to a single factor. It’s the end of the month and portfolio managers may be rebalancing portfolios.
“Again, the movement in Eurobonds could be a response to slowing global inflation. Then, it could be your initial hypothesis that the market is responding positively to fuel subsidy removal.
“If it’s the third option, it means markets expect overall fiscal benefits from the fuel subsidy and less pressure on govt finances. However, immediate effects are likely to be significantly abrasive. High inflation expectation is not a reason to invest in the stock market.
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“Local Investors buying Eurobonds seems to be a more logical strategy to mitigate against naira exposure as FX devaluation risks will be higher due to inflation.”
In other news, while the financial markets may be responding positively, the streets are giving off a different reaction especially due to the new President’s proclamation of the removal of fuel subsidy. After his declaration, fuel queues have started resurfacing in different parts of Nigeria, with petrol prices hitting N600 in some parts of the country.
Tinubu’s announcement did not provide specific details or information. According to a Twitter user with the handle @LaNouvelleVic, he noted,
“Dear NNPC, there is no panic buying. The queue is because most fuel stations are not selling. FGN policy statement on subsidy is incomplete:
- Stations who sell at N185 now, what would be the restock price at depot?
- Would supply be guaranteed and at what price?”
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The NMDPRA also issued a press statement to reassure Nigerians, stating that they were collaborating closely with NNPC to facilitate a seamless transition and prevent any disruptions in the fuel supply as the country transitions away from the subsidy regime.
