by Niyi Jacobs
Nigeria’s economic growth slowed in the first quarter of 2024, with GDP growth rate declining to 2.98%, according to the National Bureau of Statistics (NBS). The growth rate, although higher than the 2.3% recorded in the same period last year, is lower than the 3.4% recorded in the previous quarter.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) also raised the Monetary Policy Rate (MPR) by 150 basis points to 26.25%, citing concerns about inflation and economic stability.
In the stock market, the NGX All-Share Index (ASI) continued its downward trend, falling by 0.5% to close the week at 97,612 points, with the market capitalization at 55 trillion naira. Despite being up 30.5% year-to-date, the market saw a 6% loss for the quarter.
However, insurance stocks are in focus as investors seek safe-haven assets amidst economic uncertainty. In the latest episode of “Follow the Money with Ugodre,” four insurance stocks were identified as key picks for the week, offering a potential hedge against market volatility. Listen to the episode for more insights and analysis.
Pension Index Stocks Slump: Understanding the Bearish Trend
The NGX Pension Index, a benchmark for the Nigerian equity market, has exhibited a bearish trend, declining by 11% between Q1 2024 and May 20, 2024.
This contrasts with the broader market NGX All Share Index, which declined by only 2.5% during the same period. The total market capitalization of the 40 component companies fell by 6.47%, from N51.7 trillion to N48.3 trillion.
The NGX Pension Index is designed to measure the performance of the top 40 companies on the Nigerian Exchange (NGX) in terms of market capitalization and liquidity.
A declining index signals potential issues within the component companies, such as declining profits, regulatory challenges, or broader economic problems.
The index’s decline can be attributed to the bearish trend in most of the component sectors, especially the banking and consumer goods sectors. The banking sector experienced a 24% decline in total market capitalization due to the CBN’s announcement of a new capital requirement. The consumer goods sector declined by 3.26% due to poor performance by most companies.
The industrial sector also experienced a bearish trend, with cement companies reporting reduced profitability.
Investors should be mindful of these trends and consider the underlying factors affecting the market.
The NGX Pension Index’s underperformance reflects broader economic and sector-specific challenges, and investors should be cautious and consider diversifying their portfolios.
The NGX Pension Index’s performance is crucial for investors, as it provides a realistic and investable benchmark for the Nigerian equity market. Understanding its trends, whether bearish or bullish, is essential for making informed investment decisions. A bullish trend indicates strong investor confidence, while a bearish trend signals potential issues within the component companies.
