The Nigerian stock market closed on a bearish note on Thursday as investors lost N1.92 trillion amid sell-offs in banking and cement stocks following reactions to new regulatory guidelines issued by the Central Bank of Nigeria (CBN).
Market capitalisation declined by 1.23 per cent to close at N153.858 trillion from N155.780 trillion recorded in the previous trading session.
Similarly, the All-Share Index (ASI) dropped by 2,994.90 points or 1.23 per cent to settle at 239,734.61, compared to 242,729.51 posted earlier.
The Year-to-Date return also moderated to 54.82 per cent.
Speaking on the market performance, investment banker and stockbroker, Tajudeen Olayinka, attributed the downturn to investors’ reactions to the new CBN directive concerning foreign subsidiaries of Nigerian banks.
According to him, the apex bank directed banks operating in foreign countries to limit investments in foreign subsidiaries to 10 per cent of their equity capital or shareholders’ funds.
He explained that banks currently above the regulatory threshold had also been directed to begin divestment from such subsidiaries.
“The drop in the ASI and market capitalisation came from market reactions to the new CBN guideline that compels banks operating in foreign countries to limit their investment in foreign subsidiaries to 10 per cent of their equity capital or shareholders’ funds,” Olayinka said.
He noted that investors interpreted the directive as an indication that revenues and reserves from foreign operations would now be integrated into banks’ existing regulatory capital frameworks.
According to him, the development may affect future dividend payouts and reduce corporate payout flexibility.
“This will limit their corporate payout capabilities or make future payouts dependent on growth trajectories,” he added.
Olayinka explained that the development triggered significant repricing of international banking stocks, which subsequently affected other highly capitalised equities, especially cement companies.
Despite the losses, he maintained that the development was temporary, describing the affected banks as fundamentally strong and undervalued.
“I think the development is temporary, as the affected banks are already well capitalised and largely undervalued.
“Therefore, the upside potentials for the banks are very high, suggesting that anyone selling off banking stocks at this time might actually be throwing away good money,” he said.
Meanwhile, market breadth closed positive with 42 gainers against 30 losers.
CAP and FTN Cocoa Processors led the gainers’ table after appreciating by 9.99 per cent each to close at N212.50 and N8.04 per share respectively.
Berger Paints, Zichis Agro Allied Industries and Meyer also recorded gains of 9.97 per cent each to settle at N98.75, N30.33 and N17.10 per share respectively.
On the losers’ chart, University Press declined by 10 per cent to close at N4.50 per share, while Red Star Express lost 9.59 per cent to settle at N25.45.
Skyway Aviation Handling Company also dropped by 8.63 per cent to close at N130.75 per share.
Market activity improved during the session as total traded volume increased by 29.34 per cent to 1.83 billion shares valued at N72.17 billion exchanged in 81,131 deals.
NEM Insurance recorded the highest traded volume with 360.56 million shares, accounting for 19.70 per cent of the total volume traded.
Seplat Energy led in value terms with transactions worth N12.98 billion, representing 17.99 per cent of the total value traded for the day.
