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Saturday, September 23, 2023

Trillion Naira Stock Club Rises to 5 as Nigeria Rally Deepens

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Nigeria’s stock market rally is becoming broad based leading to 5 listed companies now sporting a valuation higher than a trillion naira, more than twice the number from less than 2 months ago.

The move up in stocks has been powerful with most sectors represented, including industrials, Telecoms, Consumer Goods and Financials.

MTN Nigeria with a market capitalization of N3.179 trillion is the largest listed company in Nigeria, followed by Dangote Cement at N3.152 trillion, BUA Cement N1.537 trillion, Nestle Nigeria at N1.11 trillion and Guaranty Trust Bank at N1.030 trillion.

The five companies in the Nigeria trillion-naira stock club have a combined market capitalization of N10 trillion equivalent to 59 percent of the entire market capitalization of N17.05 trillion.

Which Trillion Naira Stock offers the Best Value?

From a strictly dividends perspective Dangote Cement currently offers the best value as it offers investors a relatively juicy yield of 8.89 percent.

This is followed by Guaranty Trust Bank with a dividend yield of 8.08 percent, Nestle Nigeria 5 percent, MTN Nigeria 4.48 percent and BUA Cement 3.91 percent.

It is important to note that the lowest dividend yielding trillion-naira stock still offers yields that are 10xs higher than the one-year Treasury bill which currently yields 0.39 percent.

Meanwhile the latest inflation rate according to the National Bureau of Statistics jumped to 13.7 percent in September. This means that equities are providing a higher risk premium than fixed income for the first time in a long time in the Nigerian capital markets as in essence fixed income Investors are willing to lend the Government tons of (other people’s money) and receive negative real returns for their troubles.

Perhaps that is why Nigerian Stocks are the best performers in Africa, returning +21.6 percent year to date. This compares with South African equities -8.4 percent, Kenya -15.9 percent, Ghana -18.9 percent and Egypt -24,7 percent.

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