NGX Market Downturn Wipes Out N322bn as Bearish Sentiment Deepens

The Nigerian Exchange (NGX) closed another volatile session in the red as investors lost an estimated N322 billion in market value, extending a bearish run that has persisted over the past week. The sustained downturn highlights growing concerns among market participants as macroeconomic headwinds, profit-taking, and weak investor sentiment continue to weigh on equities.

At the close of trading, the market capitalisation of listed equities dropped to N88.6 trillion, compared to N88.9 trillion in the previous session. Similarly, the All-Share Index (ASI) shed 0.36 percent to close at 156,204.31 points, as investors offloaded shares in key sectors, including banking, industrial goods, and consumer goods. The losses underscore the fragile confidence in Nigeria’s equities market despite recent gains in some blue-chip stocks earlier in the month.

Analysts attribute the bearish momentum to a combination of factors, including uncertainties in global oil prices, tightening monetary policies by the Central Bank of Nigeria (CBN), and cautious positioning by investors ahead of key policy pronouncements. The CBN’s current drive to contain inflation, which remains high despite recent marginal declines, has pushed up yields in fixed-income instruments, making them more attractive relative to equities. This shift has caused a reallocation of funds by institutional investors who prefer safer and more predictable returns.

The sell pressure was particularly heavy in banking stocks, which had earlier enjoyed strong rallies following improved earnings reports. With interest rates elevated, banks have benefitted from higher interest income, but investors are now cautious of overstretched valuations. The industrial goods sector, dominated by cement producers, also witnessed declines as traders booked profits amid uncertainties over energy costs and weak demand in the construction sector.

Despite the negative mood, trading activity remained relatively robust, with turnover volumes reflecting increased investor attempts to rebalance portfolios. However, the breadth of the market remained weak as decliners significantly outnumbered gainers, further cementing the bearish tone. Some analysts maintain that bargain hunting may soon return if the market continues to shed value, particularly in fundamentally strong stocks now trading at attractive levels.

Market watchers also highlight the influence of external developments, including global economic concerns and monetary tightening in advanced economies. With oil prices oscillating and Nigeria still grappling with crude production challenges, foreign investors remain largely cautious about exposure to Nigerian equities. The gap between foreign portfolio inflows and outflows has widened in recent months, contributing to volatility in the local bourse.

Domestically, the equities market is also reacting to structural economic issues, including weak consumer demand, rising operational costs for listed firms, and policy uncertainties. The continued depreciation pressure on the naira has further dampened investor confidence, particularly among international stakeholders, even though recent inflows have provided some short-term support to the foreign exchange market.

Market operators believe that the bearish trend could persist in the short term as investors adopt a wait-and-see approach. They argue that while some companies have posted impressive half-year results, the overall market mood remains cautious given the broader economic environment. The performance of the equities market is increasingly tied to Nigeria’s macroeconomic stability, which is still under pressure despite government efforts at reforms and fiscal adjustments.

Investors are also closely watching the outcomes of upcoming policy moves by the Federal Government and the CBN. Measures aimed at stabilising the currency, boosting foreign reserves, and curbing inflation could provide renewed optimism for the market. Until then, many retail and institutional investors may remain on the sidelines or prefer to diversify into fixed-income securities, real estate, and alternative investments.

Nonetheless, there is a sense among some analysts that the ongoing correction, though painful for investors, is healthy for the market in the medium term. By moderating valuations that had become overheated in earlier trading sessions, the correction could pave the way for renewed long-term growth once fundamentals stabilise.

In the meantime, stakeholders have called for deeper reforms to strengthen the capital market, including policies that encourage more listings, improve liquidity, and attract both local and foreign investors. The Nigerian capital market remains relatively shallow compared to its potential, and experts believe that creating an enabling environment for businesses to thrive will ultimately translate into a more vibrant exchange.

As the NGX navigates this bearish stretch, the resilience of key sectors and the ability of listed firms to sustain earnings growth in a challenging environment will determine how quickly investor confidence can be restored. For now, the market remains pressured by macroeconomic realities and investor caution, with the N322 billion loss serving as a reminder of the fragility of sentiment in Nigeria’s capital market.

While the short-term outlook is clouded by uncertainty, long-term investors are being urged to look beyond current volatility and focus on quality stocks with strong fundamentals. If reforms gain traction and macroeconomic stability improves, Nigeria’s equities market may yet rebound strongly, but in the immediate term, bearish undertones are likely to dominate trading sessions.