Lagos: The Nigerian equities market ended August on a bearish note, suffering a loss of N587 billion in market capitalisation. This decline was attributed to weak investor participation and disruptions linked to the transition to a new settlement structure.
According to News Agency of Nigeria, the market capitalisation, which started the month at N158.326 trillion, fell by 0.37 per cent to close at N157.739 trillion. Similarly, the All-Share Index (ASI) decreased by 1,084.29 points, or 0.44 per cent, from 245,283.68 at the beginning of August to 244,199.39 by the end of trading.
Throughout the month, the market experienced 13 sessions of losses compared to seven sessions of gains during the 20 trading days, indicating sustained selling pressure. Despite the decline in market capitalisation, trading volume saw a 50.8 per cent increase, with investors exchanging 26.867 billion shares valued at N634.801 billion in 899,053,057 deals, compared to 17.817 billion shares valued at N1.184 trillion in 1,166,154 deals recorded in July.
Market analysts pointed to disruptions from the implementation of the new settlement structure as a factor affecting investor participation. Mr Tajudeen Olayinka, Managing Director of Wyoming Capital and Partners, noted that recent adjustments to the equities market settlement system had eased disruptions and improved liquidity.
In an interview, Olayinka explained that from late July through August, the market faced significant disruption as some key investors, particularly foreign investors, stayed away due to challenges with the new settlement structure. He highlighted that the new system required investors to pre-fund transactions, impacting the participation of both foreign and local investors.
The situation affected expected market activities as investors adapted to the new settlement cycle. However, subsequent fine-tuning of the system has helped restore confidence and improve liquidity. Adjustments included extending the deadline for settlement-related debit alerts, which has positively impacted market dynamics.
The market expert expressed optimism that improvements seen toward the end of August could set the stage for a stronger performance in September. Increased liquidity and renewed investor reactions were already evident in the final trading sessions of August. Moreover, the FTSE Russell’s confirmation of Nigeria’s reclassification to Frontier Market status in September is expected to influence market sentiment positively.
Institutional investors are seen as key to the market’s recovery, with their participation significantly influencing liquidity and overall market direction. The easing of settlement-related challenges is anticipated to encourage greater investor participation and support an improved rally in September.
Despite the bearish trend, several banking stocks recorded gains in August. First HoldCo, United Bank for Africa, Zenith Bank, Access Holdings, and Guaranty Trust Holding Company were among the gainers. Meanwhile, on the losing side, Aradel Holdings, Oando, RT Briscoe, Learn Africa, and MTN Nigeria experienced declines. Insurance and pharmaceutical stocks also recorded losses.
With improving liquidity conditions and settlement-related concerns easing, investors are keenly observing September to assess whether the late-August recovery marks the beginning of a sustained rebound or a temporary respite from the bearish trend.