2021 FULL YEAR: Stock market growth outpaces economy by 2.04%

2021 FULL YEAR: Stock market growth outpaces economy by 2.04%

STOCK *Investors gain N1.2trn

*Analysts predict mixed performance in 2022

By Peter Egwuatu & Nkiruka Nnorom

Against the backdrop of marginal economic recovery in 2021, Nigeria’s stock market recorded a slowdown in growth but the performance indices remained in positive territories.

Though the sustained positive trajectory in the market was slower compared to that of 2020, but it surpassed the growth recorded so far in the nation’s economy by 2.04 percentage points.

Specifically, the Nigerian Exchange Limited (NGX) All Share Index (ASI) which represents major performance benchmark, rose by 6.07 percent to close the year at 42,716.44 points from 40, 270.72 points at the close of trading in 2020, thus surpassing the nation’s Gross Domestic Product (GDP) by 2.04 percentage points.

READ ALSO: Banks’ borrowings from CBN rise 233% to N26.9trn in 2021

The nation’s GDP had recorded a sustained rebound in the first three quarters of year to close at 4.03 per cent growth Year-on-Year (YoY) in real terms at the end of third quarter 2021, largely due to base effect of the 2020 COVID-19 subdued GDP figures.

Meanwhile, another major performance indictor, NGX market capitalisation which shows value of the investments on the stock market, gained over N1.24 trillion Year-to-Date (YtD) to close the year 2021 at N22.3 trillion from N21.1 trillion at the close of trading in the year 2020.

However, Financial Vanguard’s analysis of the market showed that the Return-on-Investment (RoI) in 2020 was higher when compared to the year 2021.

Market indicators performanceSpecifically, the ASI had gained 50.03 percent in 2020. The stock market continued its active momentum in January 2021 with the ASI appreciating by 5.32 percent. Thereafter, equities started to decelerate due to the rising yield on fixed income securities. At the end of first half 2021, H1 2021, ASI had declined to 37,907.28 with YtD return of -5.9 percent while equities market capitalization declined to N19.76 trillion. The ASI ended third quarter 2021, Q3 2021, at -11 percent.Resurgence of equities in the secondary market started early in October 2021 when the ASI became positive on the back of rising crude oil price, improving fundamentals of the economy, high expectations from Q3 2021 results and heavy transactions on FBN Holdings, and Lafarge Africa.After the expansionary monetary policy of H2’20 which drove yield on debt to low single digit, yield started to rise from February 2021, causing financial assets to retreat back to fixed income securities. As at […]

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