As our annual investor conference opens today in Lagos, we note that the NSEASI has declined by -5.3% ytd and so outperformed Nairobi while lagging Johannesburg. Our chart shows that Lagos hit its low point of -21.6% ytd very early in the year (19 January) and has recovered on sentiment. Positive news on the fiscal side and the resilient performance of top tier bank names has been balanced by what we charitably term the work in progress of the new foreign-exchange policy launched on 20 June.
Turnover has slumped to a ytd daily average of N2.4bn. Total transactions to the end of September were running 41% lower than the comparable year-earlier period. The exchange’s latest report on portfolio participation in equity trading shows monthly turnover of N95bn for September, compared with N130bn for the year-earlier period. For foreign players, the report highlights an increase from N29bn to N44bn.
It may be surprising that there was a net foreign inflow of N5bn in September. There has been some offshore buying of flagship names such as DangCem and GT Bank but, we understand, from funds “blocked” due to delayed repatriation after earlier trades or from dividend payments.
Our view is that a fully functioning fx regime will only come about gradually and in a piecemeal fashion because we cannot identify one solution large enough and politically acceptable to provide the necessary trigger.
Sources: Nigerian Stock Exchange (NSE); Bloomberg; FBNQuest Research
In our 2016 Outlook, published in late January, we forecast a decline in the index of -10.0% over the year.
