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Nigerian Equities Face Potential Slowdown Amid Economic Pressures

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stock market
stock market

The Nigerian stock market’s recent rally may be running out of steam, with the NGX All Share Index closing flat in the latest session after a period of strong growth dating back to late November.

Despite this slight plateau, the Nigerian Exchange recorded impressive gains over the past week, adding NGN 1.25 trillion in market value, a 2% increase in market capitalization. High trading volumes of 2.618 billion shares were logged, with the Financial Services Industry making up nearly 67% of the total trading activity.

Key contributors to this momentum included stocks like Royal Exchange Plc, Chams Holding Company Plc, and Universal Insurance Plc, which helped drive significant turnover. However, certain sectors, particularly Oil and Gas, as well as Sovereign Bonds, saw losses, with stocks such as PZ Cussons Nigeria Plc, CWG Plc, and Union Dicon Salt Plc among the biggest decliners.

Looking ahead, the Nigerian equity market faces a new challenge with the recent listing of the Federal Government’s December 2024 Savings Bonds, which may divert investor capital toward fixed-income instruments, putting additional pressure on equities in the near term.

The broader economic context remains a concern. Structural issues, including the removal of fuel subsidies, persistent inflation, and a weakened naira, continue to burden market sentiment. While government initiatives, like tax reforms and a new minimum wage, aim to alleviate some of these challenges, the outlook remains tepid. High inflation is expected to persist, eroding purchasing power and investor confidence, while the fragile naira may further limit foreign investment in the equity market.

Although the services sector may provide some support, overall market sentiment is expected to remain cautious, as economic uncertainty looms large. Investors are likely to adopt a wait-and-see approach in the coming weeks as they assess the ongoing impact of these economic challenges.

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