Nigerian Stock Market Suffers N480bn Loss as Focus Shifts to High-Yielding T-bills

The Nigerian stock market experienced a downturn on Thursday, with a 0.86 percent drop, as investors migrated their funds towards Treasury Bills (T-Bills) due to more attractive yields. The equities market saw a significant decline with approximately N481 billion wiped off the total value of listed stocks by the end of the trading session on the Nigerian Exchange Limited (NGX).

Raising Funds Through T-Bills

During Wednesday's auction, the Central Bank of Nigeria (CBN) successfully sold a historic N1.8 trillion in T-Bills, nearly double the initial offering of N1 trillion. This auction marked a record in the amount of capital raised in a single instance since the tracking of such data began by the CBN.

The offered T-Bills at the Primary Market Auction (PMA) were divided into three different maturities: N200 billion for 91-day bills, N200 billion for 182-day bills, and N600 billion for 364-day bills. This strategic move indicated a rising trend in the market yield.

Investor Sentiment and Market Reaction

Analysts had anticipated the shift in investor sentiment toward assets with reduced risk but higher returns. They suggested that the attractive yields provided by T-Bills would naturally elevate investor expectations for dividend yields. Consequently, a short-term market correction in the equity sector was foreseen.

The one-year Nigerian Treasury Bill's yield saw a significant increase to 23.4 percent after the auction, presenting a potential interest for foreign portfolio investors looking to capitalize on these improved returns. With the inflation rate currently at 28.92 percent, the real return on the one-year T-Bill stands at a negative 5.52 percent, albeit an improvement from the prior negative return of 16.68 percent.

Despite the potential for investor interest in equities, Lagos-based Vetiva research analysts observed that investors remained cautious, hinting at a bearish sentiment in the stock market.

Leading the decline were stocks like NASCON, which plummeted from N65 to N58.50, Eterna falling from N22.10 to N19.90, and Sterling Financial Holdings Company dropping from N5.90 to N5.31. The NGX All-Share Index (ASI) and Market Capitalisation reflected the market's reaction, closing lower from the prior day's standings.

Nigeria, Stocks, T-Bills