Can domestic investors improve Nigeria’s stock market performance?

Feb 16, 2022|Adesola Afolabi

If you have been observing recent activities on the Nigerian Exchange Limited (NGX), formerly known as the Nigerian Stock Exchange (NSE), you might have noticed something exciting.

The All Share Index (ASI), which measures the average performance of the stocks listed on the exchange, grew by 10% in the first six weeks of 2022. Meanwhile, as of the same time last year, the ASI showed that the market’s performance had only improved by 0.42%.

Some takeaways:

Activities on the Nigerian exchange have recorded a positive run in the last two years. In 2020 and 2021, the stock market’s performance increased 50% and 6%, respectively. This is despite having significantly fewer foreign investors trading on the stock market.
With foreign investors trading participation reducing from 49% in 2019 to 23% in 2021, the potential of domestic investors to make the stock market competitive with regional peers is in question.
The Nigerian Exchange Limited (NGX) is often compared with the Johannesburg Stock Exchange (JSE) to measure performance. But the JSE can be an outperformer. Yet, when compared to other emerging markets like Malaysia (112%), Korea (87%), India (76%), Morocco (52%), Indonesia (47%), Egypt (17%), Nigeria’s market capitalisation to GDP at 8% shows it is the runt of the litter.

Significant events like listing a new company such as the BUA foods listing can cause an increase in the ASI’s growth. So, this means that the performance can’t be entirely attributed to listed stocks. However, the figure also indicates that the NGX is recording a notable recovery from the low growth in previous years.