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Lagos the Outperformer of SSA Stock Markets

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Wednesday, November 29, 2017 09:15AM /FBNQuest Research

We periodically track the performance of the three largest stock markets in sub-Saharan Africa (SSA). The Lagos all-share (NSEASI) is still far ahead of Nairobi (NSE 20) and Johannesburg (all-share). In local currency terms it has gained 39.6% ytd, compared with 19.9% for Nairobi and 18.8% for Jo’burg. 

It was still in negative territory ytd in early May but has surged, driven largely by the offshore investor response to the fx window for investors and exporters (NAFEX). Domestic investors have played a secondary role. 

This surge over almost seven months has not been a stampede. Turnover ytd has averaged just US$13.2m equivalent at the CBN rate, and US$17.2m since the watershed on 09 May. Foreign investors’ share of transactions was 53% and 65% in August and September respectively, the latest months for which the NSE data is available. 

The Nigerian market has benefited from an improvement in macro data and news. The economy has emerged from recession, the oil price is back above US$60/b, reserves accumulation has been impressive and the FGN has recently tapped the Eurobond market for the second time this year. 

Further, FGN bond yields have fallen by more than 200bps in the past three months, raising the possibility that domestic institutions could turn in large numbers to the equities market. This compression of yields should be supported by the FGN’s approved plans for the externalization of domestic debt (NTBs).  

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As we enter the very long run-up to the elections in February 2019, there is a need to test popular theories about the impact of elections on the Nigerian economy. One such is that activity on the NSE slows markedly in the approach to polls. This is not borne out by data for the turnover in the six months before elections in 2015. 

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