The Nigerian stock market reached unprecedented heights on Tuesday, catapulting to its highest level since July 2008.
This surge comes on the heels of the suspension of Central Bank Governor, Godwin Emefiele, as investors are placing their bets on a potential currency devaluation.
The main index of the Nigerian Exchange soared above 57,437 points, in stark contrast to the flat performance of MSCI’s main emerging equity benchmark.
According to a report by Bloomberg, the year-to-date gains for Nigerian stocks now stand at an impressive 11.8 percent, nearly double the six percent return on the MSCI index.
The remarkable rally, following the upward trajectory of Nigerian dollar bonds on Monday, signifies growing optimism among investors regarding the policy signals emanating from newly elected President Bola Tinubu.
Renowned market analyst, Tajudeen Ibrahim, Head of Research at Chapel Hill Denham, highlighted the positive correlation between a thriving economy and the performance of companies in the market.
Ibrahim stated, “An improvement in the economy will enhance the performance of companies operating in the market.”
President Tinubu’s swift actions since assuming office have further bolstered investor confidence.
The removal of fuel subsidies and the recent suspension of Governor Emefiele has sent shockwaves through the financial landscape.
As a result, the NGX Banking Index experienced an astounding 8.5 percent surge, marking its most substantial advance in over eight years.
Ibrahim further emphasized that the anticipated convergence of exchange rates is expected to enhance liquidity in the foreign currency market and drive increased trading activities for the banks.
Ibrahim, added, “The exchange rate convergence is expected to lead to improvement in liquidity in the foreign currency market and will increase trading activities for the banks.”
However, amidst the market’s euphoria, pressure continues to mount on the naira, with traders speculating further depreciation toward its market value.
Currently trading at 474 naira per dollar, the currency’s fluctuations remain a topic of intense interest and scrutiny.
