- As External reserve falls by $535m in May
The unprecedented bullish run that prevailed in the equities market for most part of last month (May), especially at the later part of the month that saw the equities capitalisation gallop to over N10 trillion mark has resulted in huge N1.29 trillion gains to investors.
The action pushed the Return-on-Investment, RoI, for the period to 14.5 per cent, higher than the year-to-date, ytd, return, which stood at 9.8 per cent, a development market operators attributed to some positive macro-economic developments in the country and better than expected first quarter, 2017 (Q1’17) results.
The capital market operators further opined that Prof. Yemi Osinbajo’s return as the Acting President helped to buoy activity in the market within the period.
Financial Vanguard findings on the stock market activities in the period showed that the banking sector topped others, appreciating by 26 per cent on the back of gains in top banking stocks like FBN Holdings Plc, Ecobank Transnational Incorporated, ETI, United Bank for Africa, UBA, Zenith Bank Plc and Guaranty Trust Bank Plc.
The late passage of the Petroleum Industry Bill, PIB, by the National Assembly, NASS, in the later part of the month could not lift sentiment in the oil and gas sector as it lagged behind others, depreciating by 2.5 per cent. This, however, was an improvement compared to 5.4 per cent negative return recorded in the sector in the five month to end May, 2017.
Consequent upon the rally, the equities’ capitalisation rose by N1.29 trillion from N8.91 trillion at the beginning of the month’s trading session to N10.2 trillion, thus representing 14.4 per cent returns. Also, the All Share Index, ASI, rose by 14.5 per cent from 25,756.51 points to settle at 29,498.91 points.
Some of the positive developments that impacted the market during the period include the creation of the investors and exporters foreign exchange window by the Central Bank of Nigeria, CBN, which allowed easy access to foreign exchange by both investors and exporters. Since the introduction, the window has prompted unprecedented rally in the stock market, according to capital market operators.
During the period, the Purchasing Managers Index, PMI, rose to over 50 per cent indicating revival in private sector operation. Added to these is the gross domestic products, GDP, figure, which, though, contracted to 0.5 per cent in April, was a significant improvement against the two previous positions.
In the meantime, the nation’s external reserve recorded its second monthly decline of $535 million last month. This came as the Central Bank of Nigeria (CBN) had intervened in the foreign exchange market by selling $6.84 billion from January to last month.
According to the CBN, the external reserve fell from $30.864 billion at the end of April to $30.329 billion on May 31, translating to decline of $535 million during the month. Vanguard analysis showed that the reserve rose steadily by $7.06 billion from $23.93 billion on October 24 last year to $30.99 billion on May 4 when it commenced its steady decline.
The reserve grew by $819 million in November, $1.07 billion in December, $2.33 billion in January and by $1.47 billion in February. The reserve, however, dropped by $645 million in March, while it also grew by $573 million in April.
The decline in the reserve in May was driven by increased dollar sales by the Central Bank of Nigeria (CBN), and the slight drop in price of crude oil price from $53.69 dollars on April 12 to $48.85 per barrel on June 1st. Vanguard investigations revealed that the CBN has intervened in the foreign exchange market by selling $6.84 billion to meet various forex needs.
Last week, the apex bank sold $460 million in the interbank foreign exchange market, comprising $285.8 million for Retail Secondary Market Intervention Sale (RSMIS), $100 million for Wholesale SMIS, $52 million for SMEs and $45 million for invisibles.
In addition to these, the apex bank also sold $40,000 to each of the 3,145 bureaux de change across the country, translating to injection of $125.8 million in the retail segment.
Vanguard
