The Grandtowers Market Watch for January 2025 provides a detailed analysis of the key economic, financial, and market trends impacting Nigeria’s economy, highlighting significant shifts across various sectors, including domestic economy, equity markets, banking, oil and gas, insurance, and agriculture. This report offers an in-depth look at the latest developments, such as changes in fiscal allocations, public debt, monetary policies, and market performance, to provide investors, stakeholders, and decision-makers with valuable insights for strategic planning and investment decisions.
Domestic Economy:
January saw notable developments in Nigeria’s economic landscape, as the Federation Account Allocation Committee (FAAC) disbursement to the three tiers of government dropped by 17.5% month-on-month (m/m), totaling N1.42 trillion. This decline was attributed to a 6.6% appreciation in the naira, which reduced foreign exchange gains, as well as a 1.4% decrease in oil and gas royalties, imports, exports, and other government revenues.
In terms of public debt, Nigeria’s total debt grew to N142.32 trillion ($88.89 billion) in Q3 2024, up from N134 trillion in Q2 2024. This increase was driven by both external and domestic debt growth, signaling rising financial obligations.
The Central Bank of Nigeria (CBN) implemented a more restrictive monetary policy in response to persistently high inflation. The Monetary Policy Rate (MPR) was raised by 0.25% to 27.50%, and the Cash Reserve Ratio (CRR) was increased by 0.50% to 50%. While food inflation saw a slight decrease (down to 39.84%), headline inflation remains high at 34.80%, which continues to influence borrowing and investment strategies across the economy.
Nigerian Equity Market:
The Nigerian equity market showed positive performance in January, with the NGX All-Share Index (ASI) gaining 0.87%, closing at 104,496.12. Market capitalization increased by 1.67%, reaching N64.709 trillion. Most indices saw upward movement, except for NGX Insurance and NGX Industrial Goods, which declined by 2.86% and 0.52%, respectively, while the NGX ASeM closed flat.
In terms of trading activity, a total turnover of 3.245 billion shares worth N69.198 billion was recorded across 77,270 deals. The Financial Services Industry led the activity chart, with 1.742 billion shares valued at N32.529 billion traded, accounting for 53.69% and 47.01% of total turnover volume and value, respectively. The Services sector followed closely, while the Oil and Gas Industry also saw notable trading volumes.
Banking Sector:
The Nigerian banking sector continued to show varied but generally promising financial performance. GTCO stood out with the highest Earnings Per Share (EPS) of ₦44.50 and a market capitalization of ₦1.84 trillion, reflecting strong profitability. UBA attracted attention for its dividend yield of 11.51%, appealing to income-focused investors seeking stable returns.
Zenith Bank and Access Bank demonstrated robust growth with Year-To-Date (YTD) returns of approximately 11%, along with attractive Price-to-Earnings (P/E) ratios, suggesting that these banks represent good value for investors.
Conversely, First Bank had the lowest P/E ratio of 1.78, which could signal potential undervaluation. Access Bank and UBA also recorded high trading volumes, reflecting strong liquidity. Investors will need to weigh profitability, dividends, and market conditions when assessing these financial institutions.
Oil & Gas Sector:
Performance within the oil and gas sector showed mixed results in January. Oando emerged as the leader, with a notable 15.15% YTD growth, signaling strong investor confidence. On the other hand, MRS and Total experienced declines of -25.21% and -4.01%, respectively, highlighting challenges in the sector.
Total recorded the highest EPS of ₦86.93, indicating strong earnings potential. Seplat, while exhibiting a high stock price, offered a 4.13% dividend yield, making it appealing to income-focused investors. However, Oando’s high P/E ratio of 34.19 suggests that market expectations are high, and Conoil, despite a stable price, faced low liquidity, which might be a concern for some investors.
READ ALSO: Nze Duru Bags FG Appointment
Given the mixed performance in the oil and gas space, investors need to carefully evaluate stock fundamentals, growth prospects, and dividends before making decisions.
Insurance Sector:
In the insurance sector, performance was mixed, with some companies seeing strong growth while others showed more modest results. AIICO Insurance led the sector in YTD growth, recording a 23.78% increase, reflecting solid investor confidence. AXA Mansard, with an EPS of ₦3.18 and a dividend yield of 4.32%, emerged as an attractive stock for both earnings and income-focused investors.
Cornerstone Insurance offered the highest dividend yield of 4.88%, appealing to those seeking income-generating investments. Meanwhile, Veritas Capital showed the highest P/E ratio of 53.33, suggesting it may be overvalued or exhibiting high growth expectations.
Stocks like WAPIC and Veritas, which do not offer dividends, might deter income-focused investors. Liquidity also varied, with AIICO and Veritas showing higher trading volumes, indicating stronger market interest. As always, investors should consider growth potential, risk, and dividend yield when making investment choices in the insurance sector.
Agriculture & Other Sectors:
In the agriculture sector, PRESCO demonstrated strong growth potential with a 23.16% YTD increase, accompanied by a low P/E ratio of 9.57, signaling potential value. However, PRESCO does not offer a dividend, which may limit its appeal to income investors.
OKOMU showed moderate growth and a stable dividend yield of 3.22%, making it a solid option for investors looking for steady returns. On the other hand, BUA Foods displayed a high P/E ratio of 74.35, indicating potential overvaluation, even though it offers a modest 2.30% dividend yield.
Dangote, despite being a major player in the sector, experienced negative YTD growth, which could raise concerns for potential investors looking for consistent growth.
