Billionaire investor Femi Otedola purchase of a significant stake in Dangote Cement propelled an unprecedented stock rally that is pivotal to the Nigerian equity market outperforming its Emerging Markets (EM) and African peers in the first six months (HI) of the year.
At the end of first half (H1), the nation’s bourse’s year to date (ytd) return was 33.81 percent, driven mainly by the rally in January, according to data from Chapel Hill Denham Limited.
That compares with Markets such Germany (DAX), -8.86 percent; China (Shanghai)-0.25 percent; U.S.A (DIX), 3.72 percent; U.K (FTSE 100); 5.57 percent; Europe (Stoxx 50), 8.24 percent; U.S.A (S and P), 14.48 percent, and Japan (Nikkie 225), 18.29 percent, according to data gathered by Chapel Hill Dehman Limited.
The data further shows that the local bourse also did better than its African peers such as Egypt (EGY 30)-1.34 percent; South Africa (JSE), 3.52 percent; Morocco (MASI), 7.83 percent; Kenya, (NSE-ASI), 18.87 percent; Ghana, (GSE), and 22.34 percent.
The renewed interest by Femi Otedola-the activist investor who is reshaping the country’s economy through his investment in many sectors such as utility, banking, and industrial goods- and Dangote Cement fanned corporate actions like as never been seen before as the All-Share Index saw a remarkable return of 33.1 percent in January alone, outperforming the combined returns of the subsequent five months.
When he bought 6 million worth of shares of Dangote Cement in January, the cement maker’s share price rose 9.98 percent as the market capitalisation jumped to N10 trillion from N5.13 trillion the corresponding period of 2023.
Dangote Cement shares have gained 105.10 percent so far this year as it has a market capitalisation of N11.19 trillion as at July 9 2024 , making it the most valuable firm in Nigeria.
Without magniloquence or hyperbole, Femi Otedola is the cream of the crop among billionaire investors as his magic fingers have transformed companies he manages, and these firms are delivering returns to shareholders as they are among the best performers on the stock exchange
For instance, his utility firm Geregu Power Plc has a year to date gain of 150.13 percent as of July 9, 2024, recording double digit growth in profit and revenue.
At the start of the year, the equity market enjoyed a monster rally on the back of global equity sentiments underpinned by investors’ fearsome appetite for Artificial Intelligence (AI) stocks in the United States and Europe.
The market rallied for 15-trading sessions consecutively in January and closed the month above 100,000 points returning 33.1 percent. The NSE All-Share Index peaked at 105,722.80 (the highest in history) on 16 February 2024, according to data gathered by Chapel Hill Denham.
Analysis of the sectoral performance in the first six months shows the industry led with a year to date return of 73.10 percent, thanks to renewed interest of Femi Otedola in Dangote Cement.
Others that gained were: Consumer goods; 41.05 percent; oil and gas, 38.12 percent; and insurance sector, 21.42 percent.
However, the banking sector was down or dipped by -7.47 percent, as there were growing concerns about the impact of the central bank recapitalisations on earnings per share (EPS) that dampened sentiments and the inability of some lenders not being able to meet the threshold set by the regulator.
Analysts at Chapel Hill, however, observed that the stock rally has lost steam or waned since the end of February in the subsequent months after the central bank hiked the Monetary Policy Rate (MPR), making risk-free assets attractive to investors and after the announcement of banks’ recapitalization exercise.
To tame a red-hot inflation that is waging war on Nigerians, the MPC of the Apex Bank has increased the benchmark interest rate by 150 basis points from 24.75 per cent to 26.25 per cent.
Consumer prices rose an annual 33.95 percent in May, compared with 33.7 percent in April, the National Bureau of Statistics said in a report published on its website. The median estimate of four economists in a Bloomberg survey was for 34.1 percent. Prices rose 2.1 percent in the month.
An aggressive tightening policy which has seen interest rates go up has ballooned bond yields, but there is no threat of an inverted yield curve.
The Nigeria 10-Year Government Bond currently offers a yield of 19.684 percent, according to data from Nigerian Government Bond Curve.
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