The Nigerian Exchange (NGX) All-Share Index (ASI) has seen a remarkable surge this year, driven by economic reforms, improved corporate profits, and heightened investor confidence.
However, the major stock market in Nigeria has been experiencing a decline this month, with several indicators suggesting a potential exhaustion of this bull run.
The ASI has decreased by over N7 trillion this month.
The All-Share Index (ASI) dropped 0.12 percent intraday to close at 144,986.51 on Tuesday, down from 145,159.77 points, indicating that the Nigerian stock market continues its bearish momentum and prolongs the earlier losses
The year-to-date (YTD) return fell to 41 percent, while market capitalization fell by N110.20 billion to close at N92.2 trillion.
Profit-taking in ZENITHBANK (-3.10%), PZ (-2.58%), UBA (-2.51%), NGXGROUP (-1.90%), ACCESSCORP (-1.12%), OANDO (-0.59%), and 21 other companies were the main cause of Tuesday’s decline. While LIVINGTRUST led the list of losers, NCR led the list of gainers and traded above its 52-week high at N30.95. With 58.78 billion units traded, TANTALIZER closed with the highest volume, while ARADEL closed with the highest value, totaling N9.50 billion.
The ASI has recorded a 3.19% monthly decline after a significant recovery from a 2010 low earlier this month.
Sell-offs in blue-chip stocks, particularly in the banking and insurance sectors, amid concerns about tax reform, indicate a trend of profit-taking.
Analysts suggest that this behavior may indicate an overstretched market, following an annual increase of 59% in some metrics.
Tax Reforms and Capital Gains Tax (CGT) Fears: Proposed changes to triple the CGT to between 25% and 30% on gains over N150 million, effective January 2026, triggered panic selling, particularly among foreign investors. The All-Share Index (ASI) dropped by 5.01% in a single session on November 11, marking the worst decline since March 2010, amidst heightened uncertainty.
Sentiment in the market has somewhat stabilized, allowing for a partial rebound after Finance Minister Wale Edun intervened on November 15, promising consultations and exemptions for foreign shares or reinvested gains through Central Bank of Nigeria (CBN) channels.
Global uncertainties, including interest rate fluctuations and the volatility of Nigeria’s foreign exchange market, could lead to further corrections in the stock market.
Additionally, US President Donald Trump’s threats of military action against Nigeria over alleged religious persecution, specifically regarding Christian killings by Islamist militants, along with the overall increase in insecurity, contributed to a risk-off environment in November.
Nigeria and other frontier economies are facing a decline in investor confidence, largely due to Trump’s proposed tariffs on imports from emerging markets, which range from 20% to 60%.
This downturn is also influenced by macroeconomic factors such as year-end portfolio rebalancing, rising inflation (which reached 16.05% in October), and the bullish run of the naira, which has rallied to N1,438.7/$.
Many huge funds have sought to lock in profits after substantial gains in October, particularly in large-cap stocks like Dangote Cement and MTN Nigeria, which saw their prices drop the most this year.
Many huge funds have sought to lock in profits after substantial gains in October, particularly in large-cap stocks like Dangote Cement and MTN Nigeria, which saw their prices drop the most this year.
However, markets forecast that the All-Share Index (ASI) could climb back to 150,000 points by the end of next year amid such challenges. An improved clarity in policy potentially extends year-to-date gains. Investors may find profit opportunities in undervalued sectors, such as banking and insurance, currently trading below their book values.
Long-term optimism is bolstered by Nigeria’s projected non-oil growth, which is expected to reach between 3.6% and 4% GDP by 2026. However, diversification will remain essential in navigating global challenges.