As Nigerian stocks close in on historic year high, many experts predict that Q3 returns may send the NGX back to earth. 

The All Share Index (ASI) of the Nigerian Exchange Group closed on a high of  65,669.29,  on July 11, 2023, the highest recorded this year. It is 701.91 basis points shy of the single day all-time high for Nigerian stocks obtained on March 15, 2008. While profit-taking moves by investors will impact those numbers this week, many experts say that H1 reports–which are due this month–may present some shocks. 

Onome Ohwovoriole, an analyst with Money Africa, told TechCabal that he doesn’t see the likelihood of the index hitting the 67,000 mark in July. Ugochukwu Obi-Chukwu, the Founder of the publication, Nairametrics, also said, “There is fear that they may be a bubble somewhere. I thought that yesterday, we were going to cross the all time high. All time is around 66,000 basis points but we were very close to it. ASI dropped yesterday, it most likely will recede today. It looks like profit taking.” 

Market experts say Profits may decline soon

While 160 companies are listed on the NGX, market experts say that the gains have been mainly driven by seven companies. Those seven companies also represent 66% of the market capitalization of the NGX. It leaves the exchange in a vulnerable place; all the recent gains of the past few weeks could easily be reversed. 

“I have been telling people to be careful. The economy is not so good. Inflation rate will go up, subsidy removal has been completed,  prices are up, purchasing power is down, most companies would struggle. The feelers we get from them is that it is not easy, the Nairametrics founder said. 

“Profits will likely decline in the 3rd or 4th quarter. If that happens, how will that justify the valuations at the moment?” he asked. With H1 financial results on the way, there’s a sense that NGX’s good run may come to an end. “Strip out the financial services and oil and gas space, we could see ugly numbers from companies in the consumer goods space,” Ohwovoriole added.

Joseph Olaoluwa Senior Reporter, TechCabal

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