Stock Market Surges 4% After CBN Governor’s Exit

The stock market jumped significantly after suspension of CBN governor Godwin Emefiele. Now investors are expecting better monetary policies & foreign investments.

Nigeria’s stock market witnessed a significant surge on Tuesday, reaching its peak level since July 2008. The investors’ optimism stemmed from the suspension of Godwin Emefiele from his position as CBN governor, which they interpreted as a sign of the end of unconventional monetary policies. 

This move has instilled confidence in foreign investments, which were previously apprehensive due to the unorthodox policies.

The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and equities Market Capitalisation experienced a significant increase of 3.99 percent or N1.22 trillion on Tuesday. 

This surge occurred after the preceding 55,930.97 points and N30.455 trillion respectively, and the figures rose to 58,163.59 points and N31.670 trillion.

The market’s year-to-date return has reached +13.49 percent, which is over twice the six percent return of the MSCI index.

Investors celebrated the termination of unconventional policies by the suspended CBN governor, causing Nigeria’s biggest banks to surge up to 10 percent on Tuesday morning in Lagos.

Nigerian banking stocks such as United Bank for Africa, Zenith Bank, Access Bank, Guaranty Trust Bank, and First Bank of Nigeria Holdings have approached a one-year high.

President Bola Tinubu’s suspension of Emefiele last Friday is being seen as a significant development in Nigeria’s economic landscape. 

The move is being interpreted as a step towards ending the country’s multiple FX rates, which have caused confusion among foreign investors and discouraged capital inflows.

The banking sector is expected to receive a new lease of life as investors anticipate the departure of Emefiele. This could potentially put an end to arbitrary CRR debits that have been impacting the sector’s profitability for a long time.

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Investors have shown a significant interest in banking stocks such as UBA, GTCO, Zenith Bank, and Access Corporation, resulting in active trading in these stocks.

Nigerian Eurobonds remained stable throughout the day following an initial surge on Monday in response to Emefiele’s suspension.

Nigeria’s 2025 Eurobond has achieved a single-digit yield of 9.2 percent. Over the past year and a half, the yields on the 2025 Eurobond have been in the double digits, according to reports.

Eurobond buying activity is being driven by asset managers, including hedge funds and real money investment funds.

According to Meristem research analysts on June 13, there is expected to be a positive sentiment on the local stock market as a result of heightened investor confidence.

In the wake of the recent policy announcements made by the new president and the suspension of the former CBN boss, this development has emerged. Foreign investors are expected to view these developments positively, according to sources.

Increased buying activities are expected on tickers, particularly in the banking sector. It is anticipated that the upcoming T-bills auction will result in lower rates. As a result, there is expected to be minimal fund flow from the equities market to the fixed-income market.

Meristem research analysts have stated that they expect the market to close positively this week, unless there is significant profit-taking on bellwether tickers that could potentially move the market in the opposite direction.

According to Meristem analysts, investors are advised to hold onto banking stocks such as Access Corporation, FCMB Group, Fidelity Bank, FBN Holdings, GTCO, Stanbic IBTC Holdings, Union Bank, and Zenith Bank. 

Investment advisors have recommended that investors purchase stocks of UBA and ETI. Analysts suggest that the current stock prices have the potential to increase in the future.

Investors are expected to have mixed sentiments. Anticipation of the H1-2023 earning season is expected to drive further buy-interests, fueled by the prevailing positive sentiments. 

Investors are expected to book their gains off profitable counters, which will likely weigh on the bourse’s performance, according to reports.

Experts advise a cautious approach towards the Nigerian equities market. United Capital research analysts suggest that equity-vested fund managers and investors engage in bargain hunting exercises for fundamentally sound stocks with improved or relatively cheap valuations.

Lagos-based analysts have released target prices (TPs) for several banking stocks, including Access Corporation, FBN Holdings, FCMB, Fidelity Bank, GTCO, Stanbic IBTC Holdings, and Zenith Bank. 

These TPs suggest that there is potential for an increase in value for these stocks. United Capital analysts have released their weekly recommendations, advising investors to hold these shares.