Stock Market Decline by N2.27trn Amid Loss in Airtel Africa

Following investors’ profit-taking in Airtel Africa Plc, the market capitalization of the Nigerian Exchange Limited (NGX) stock market decreased by N2.27 trillion to N24.182 trillion in the first three weeks of October 2022. 

At the start of October trading, the Exchange’s market capitalization was N26.450 trillion. 

As a result, the NGX All-Share Index’s Month-to-Date (MtD) performance decreased by 9.4% from 49,024.16 basis points when the stock market opened for trading in October to 44,396.73 basis points. 

The market’s year-to-date (YtD) performance has dropped to 3.93 percent. 

The declining performance of Airtel Africa’s shares has been a major cause in the stock market’s downturn.

When Airtel Africa’s stock price closed last Friday at N1,312.20 per share from N2,000 when it opened for trading operations in the month under review, the market capitalization of the company decreased by N2.58 trillion. 

In spite of investor buy-interests and sell-offs, the stock market sentiment for the telecom company has remained extremely negative. Bears have dominated trading during the period under review as a result of the lead-up to the 2023 general election, interest rate hikes, and rising inflation. 

Mr. Tajudeen Olayinka, Chief Executive Officer of Wyoming Capital and Partners, explained that economic headwinds and Airtel Africa’s price correction were to blame for the market’s fall in performance thus far in October 2022.

According to him, “Economic headwinds and Airtel Africa Plc’ price correction are both responsible for the loss we have seen so far in October.

“We are actually in a period of prolonged repricing of securities across markets and instruments, due to a multiplicity of factors. We expect recovery to begin to take place once the economy begins to look more prosperous or stable.

“For those who may wish to invest on a long-term basis, the future starts today. For those who may wish to speculate for short-term benefits, they’ll need to exercise caution, as the downside risk is not completely out yet. On a balance of probability, however, prices appear good and reasonable for long-term horizon.”

Mr. David Adonri, executive vice chairman of Highcap Securities Limited, also blamed investors’ profit-taking in Airtel Africa, which is currently adjusting to the gloomy realities of the capital market, for the stock market’s collapse.

“Right from the penultimate year to the election, the socio-political atmosphere becomes charged. Politicians resort to violent rhetoric and divisive tactics, which deepens the country’s socio-political fault lines, to establish a competitive edge” he says. 

“During this period, the economy becomes overloaded with money arising from excessive election spending, which spikes inflation.

He added that, “Historical antecedents indicate that on average, both equities and bonds show positive or negative performance in the penultimate year and immediately after the election.

“While the drama of general elections can make your imagination run wild, what you need to watch out for is how the unfolding scenario will affect the economy, the capital market, and your portfolio.”