When Fear Creates Opportunity

Nigeria’s stock market has entered an uncomfortable correction after a powerful rally, but the decline may offer long-term investors a chance to reassess where value lies.

The NGX All-Share Index fell 1.35% in the week ending August 21, closing at 239,351.16 points. Its year-to-date gain narrowed to 53.81%. The selling spread across the market, with 17 of the 20 indices tracked by Proshare ending lower.

Market capitalization had previously exceeded 160 trillion naira before retreating sharply. By August 19, investors had lost about 5 trillion naira from the August 10 peak of 160.42 trillion naira. The scale of the decline has prompted concerns that the bull run may have lost momentum.

Sola Oni presents the pullback as a combination of profit-taking, portfolio rebalancing and competition from fixed-income assets. Investors who bought shares earlier in the year have an incentive to secure gains, while recent reforms and increased activity in open market operations have made short-term government securities more attractive.

A Central Bank of Nigeria OMO auction drew 4.93 trillion naira in bids against an initial offer of 600 billion naira. The 103-day bill carried a stop rate of 20.39%, while average secondary-market Treasury bill yields stood at about 18% in August. The article argues that these returns can draw short-term investors away from volatile equities without making shares irrelevant. For investors with longer horizons, the correction could make quality businesses available at more reasonable prices.