Amid the COVID-19 pandemic and economic recession, Nigerian equities played the full contrarian to close 2020 with net capital gain of N6.48 trillion.
While the details of global market closing positions are being awaited, there are indications that Nigeria may lead the global return table within the group of tracked, regulated global markets.
Benchmark indices at the Nigerian Stock Exchange (NSE) showed average full-year return of 50.03 per cent by the sound of the last closing gong for the 2020 business year. This implies net capital gain of N6.483 trillion. The recent highest return was 42.3 per cent recorded in 2017.
The All Share Index (ASI)- the value-based common index that tracks all share prices at the NSE closed 2020 at 40,270.72 points, 50.03 per cent above 26,842.07 points recorded as opening index for the year.
Aggregate market value of all quoted equities at the NSE rose to N21.057 trillion as against N12.958 trillion recorded as opening value for the year, an increase of N8.1 trillion. The additional increase in value of market capitalisation, above the ASI percentage change, was due to additional or supplementary listing of shares during the year.
Through the lockdowns and disruptions occasioned by COVID-19 pandemic, and later the unrests due to protests against police highhandedness, the stock market braced the odds of hyperinflation and economic recession to sustain and build up attractive return since the second quarter.
While a steep decline of 18.75 per cent in March 2020 had driven the first quarter to a negative return of -20.7 per cent or net loss of N2.68 trillion, the market recovered in the second quarter with positive average return of 14.12 per cent or net capital gains of N1.656 trillion. It continued its rally with average return of 9.61 per cent or net capital gains of N1.23 trillion in third quarter 2020.
The 2020 recovery is particularly spectacular when viewed against the background of negative performance in recent years. After posting a world-ranking return of 42.3 per cent in 2017, the market had reversed to negative in 2018 with average full-year return of -17.81 per cent. In 2019, investors suffered net loss of about N1.71 trillion with negative average return of -14.60 per cent. Prior to 2017, the stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion.
With inflation rate at 14.89 per cent, yield or coupon or interest rate at the fixed-income market ranging from less than one per cent to a little above one per cent for one-year instrument to some seven per cent annual coupon for two decades and a half instrument, Nigerian equities’ return is the most attractive and the only positive-yielding return in 2020, even when adjusted for inflation and cost of capital.