Lagos is the weakest performer ytd of the three stock markets we track in sub-Saharan Africa (SSA), having descended into negative territory in the past two weeks (see chart). Nairobi (NSE20) is in retreat. Jo’burg (all-share), being the most developed and liquid of the three markets, appears to have benefited the most from the signals that the normalization of US monetary policy has slowed, if not stalled. Daily turnover ytd on the two more ‘frontier’ exchanges has disappointed, averaging US$9.4m in Lagos and US$6.9m in Nairobi.
- Data from the Nigerian Stock Exchange put the foreign investor share of turnover in February at 53% but show that their trading over the month amounted to a net outflow of N11bn.
- The post-election rally was negligible, unlike in March 2015. Many equity investors may have hoped for an Atiku victory on the grounds that his campaign stressed his private-sector credentials and insisted that he would somehow “get things done”. In stark contrast, fixed-income players responded very positively with a surge in buying, as we have previously noted.
Federally-collected non-oil revenue (gross; N bn)
Sources: Nigerian Stock Exchange; Nairobi Stock Exchange; Bloomberg; FBNQuest Capital Research
- The question then becomes what would act as a trigger for sizeable new flows into the Lagos market, and thereby counter the removal of the minimum equity holding for PFAs as well as a generally uninspiring set of Q1 2019 results (other than two or three banks).
- The first would be an oil price at a higher and sustainable level. This is indicated by the well-known linkages between the price and the non-oil economy, which was demonstrated by the healthy GDP growth posted in 2010-14. Second, evidence that the banks are achieving the loan book growth of around 10% for the year, which has been their guidance, would be helpful. Further, we add surprises on the upside in the FGN’s reform agenda and sizeable new listings (such as MTN Nigeria).