All -Share Index tumbles as investors dump shares of leading banks



Uba Group

The All Share Index of the Nigerian Exchange Limited dipped by 0.4 percent to close at 49,475.42 points week- on-week during the trading week ended September 16, 2022 as a result of investors offloading the shares of major banking stocks.

Stocks of FBN Holding, Access Corporation, United Bank for Africa, Zenith Bank Plc and Union Bank of Nigeria Plc lost significant value as investors sell-off notable chunk of their shares.

FBNH recorded the biggest loss as its share value dropped -5.7 percent, ACCESSCORP (-6.2%), UBA (-6.0%), ZENITHBANK (-1.5%) and UBN (-4.2%).

Consequently, month-to-date and year-to-date returns printed -0.7 percent and +15.8 percent, respectively. Activity levels in the review week were weak, as trading volume and value declined by 24.3 percent w/w and 14.1 percent w/w, respectively.

Sectoral performance was negative as all the five key sectors on the Exchange posted losses. The Banking (-3.3%) index led the decline, followed by the Insurance (-2.6%), Consumer Goods (-0.3%), Industrial Goods (-0.2%) and Oil & Gas (-0.2%) indices.

Stock market analysts at Cordros Research expect alpha-seeking investors to rotate their portfolios towards cyclical stocks that delivered decent earnings during the Q2-22 earnings season amid the yield uptick in the FI market.

However, Cordros think the absence of a near-term catalyst will likely skew overall market sentiments to the negative side, particularly as the political space gets heated.

“Notwithstanding, we reiterate the need for positioning in only fundamentally sound stocks as the unimpressive macro environment remains a significant headwind for corporate earnings,” Cordros noted.

In line with expectations, the overnight rate expanded by 117bps, w/w, to 10.2 percent, as outflows for CBN’s weekly auctions – OMO (N20.00 billion) & FX – outweighed the inflows from FGN bond coupon payment (N51.12 billion) and OMO maturities (N35.00 billion). Notwithstanding, the average system liquidity level settled higher, at a net long position of N212.55 billion (vs a net long position of N78.72 billion in the previous week).

This week, experts expect system liquidity to tighten as the debit for FGN bond auction (N225.00 billion) may most likely overshadow the inflow from FGN bond coupon payment (N157.84 billion). Thus, they expect the OVN rate to trend upwards.

The Treasury bills secondary market closed the week with bearish sentiments as the healthy system liquidity continued to underpin demand for bills. Consequently, the average yield across all instruments dipped by 10bps to 8.3 percent. Across the segments, the average yield contacted by 11bps and 21bps to 10.6 percent and 7.6 percent at the OMO and NTB secondary markets, respectively.

That said, last week, the CBN conducted an OMO auction, where they offered and sold N20.00 billion worth of bills. At the auction, stop rates were maintained at 7.00 percent, 8.50 percent and 10.10 percent, respectively. Elsewhere at the NTB PMA, the CBN offered N159.60 billion – N11.44 billion of the 91-day, N21.85 billion of the 182-day, and N126.31 billion of the 364-day – in bills. As in previous auctions, the CBN allotted precisely what was offered at respective stop rates of 5.50 percent (unchanged), 6.00 percent (previously 5.85%), and 9.75 percent (previously 10.00%).

Following the lower inflows expected in the system this week, Cordros expect a low demand for T-bills and a slight expansion in yields from current levels.

Also in the review week, bullish sentiments persisted in the FGN bonds secondary market as investors continued to cherry-pick instruments with attractive yields. As a result, the average yields across instruments dipped by 24bps to 12.7 percent.

Across the benchmark curve, the average yield contracted at the short (-79bps) end following the bargain hunting on the APR-2023 (-383bps) bond, but was unchanged at the mid and long segments.

This week, analysts expect the outcome of the September 2022 FGN auction holding on Monday (19 September) to influence the sentiments in the Treasury bond secondary market.

At the auction, the DMO will offer instruments worth N225.00 billion through re-openings of the 13.53 percent FGN MAR 2025, 12.5000 percent FGN APR 2032 and 16.2499 percent FGN APR 2037 bonds.


“Notwithstanding, we maintain our stance that yields will continue to rise over the short-term given that the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply,” said Cordros.

Nigeria’s FX reserve recorded another decline, falling by USD228.63 million w/w to USD38.69 billion (15 September).

Across the FX windows, the naira was flat at N436.25/USD at the I&E window (IEW) but depreciated by 0.1 percent to N709.00/USD at the parallel market. At the I&E window, total turnover (as of 24 September) increased by 5.4 percent WTD to USD367.63 million, with trades consummated within the N414.00 – 452.17/USD band. In the Forwards market, the rate was flat at the 1-month (N435.85/USD) contract, but appreciated at the 3-month (+0.1% to N440.08/USD) and 1-year (+0.1% to N475.74/USD) contracts. The rate depreciated at the 6-month (-0.1% to N452.42/USD) contract.