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Nigerian Stocks' Upside Momentum Fade: Inflation, Weak Naira, and Bond Listings Dampen Outlook

January 7, 2025 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from Daniel Wesonga, Senior Sales Manager at Pepperstone.

Nigerian equities may start to see their upside momentum fade, with the NGX All Share Index closing flat in the previous session after a strong rally since late November. Despite this, the Nigerian Exchange posted a solid performance, gaining NGN 1.25 trillion in market value over the past week, with market capitalization rising by about 2%. A substantial turnover of 2.618 billion shares was recorded, with the Financial Services Industry accounting for 66.88% of total volume. Key stocks such as Royal Exchange Plc, Chams Holding Company Plc, and Universal Insurance Plc contributed significantly to the turnover. However, sectors such as Oil and Gas and Sovereign Bonds saw declines, with PZ Cussons Nigeria Plc, CWG Plc, and Union Dicon Salt Plc among the top decliners. The listing of the Federal Government's December 2024 Savings Bonds may further impact the equity market by diverting capital toward fixed-income instruments, potentially weighing on equity performance in the near term.

Furthermore, the challenging economic environment, including the removal of fuel subsidies, a weak naira, and high inflation, continues to weigh on the market. While government initiatives such as tax reforms and a new minimum wage aim to address structural issues, the overall economic outlook remains subdued. Inflationary pressures are likely to persist, dampening investor sentiment. The weak naira could further limit foreign investment, reducing the appeal of Nigerian equities. Although the services sector may offer some support, broader market confidence is expected to remain cautious amid ongoing economic uncertainty.

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