Will investors sustain sell pressure on Nigerian stocks?

The Nigerian equities market is facing challenges as data from the Nigerian exchange shows continued profit-taking activities by investors on Tier-1 Banking stocks, leading to a 13.5 per cent month-to-date decline in the banking index. The question on everyone's mind is whether these sentiments will persist in the upcoming week. Chinazom Izuora, Senior Associate at Parthian Securities, provided insights into the current dynamics of the market during an interview on CNBC Africa. Chinazom highlighted the reasons behind the recent pullback in the market, citing the impact of a 600 basis point move in the NPR (monetary policy rate) and the expected dividend yields on equity positions. The rally in security prices witnessed in January had caused apprehension among investors, leading to a correction in prices. However, with the corrections seen so far, dividend yields on equity positions have improved due to the pullback in prices. The looming recapitalization exercise in the banking sector, along with the Central Bank of Nigeria's decision to restrict banks from using their retained earnings, has added a layer of caution for investors. The expectation of a flight of capital with rising interest rates has also contributed to market volatility. Despite this, investors have been able to average down their positions and take new positions, indicating a level of resilience in the market. One of the key concerns in the market is the 13.4% dip in the banking index quarter-to-date performance. Chinazom highlighted the broader impact on other sectors such as oil and gas, pension insurance, and whether major shifts are expected. While the All-Share Index (ASI) may not reflect significant movement, individual securities have experienced substantial pullbacks, signaling a bear market for many. Looking at company news, Chinazom discussed recent developments such as Airtel Africa's share buyback program, Nestle Nigeria's re-evaluation of fixed assets, and the halted merger between NASKON and Dangote Sugar. Nestle's strategy of revaluation losses versus realized losses could set a precedent for other consumer goods companies facing similar issues. The uncertainty surrounding the Dangote Sugar and NASKON merger underscores the need for more clarity in the coming months. Overall, the Nigerian equities market is navigating through a challenging period marked by profit-taking activities, regulatory changes, and sector-specific developments. Investors are closely monitoring these factors to gauge the market's direction in the weeks ahead.