Geregu, Dangote Cement, BUA, Transcorp Shield Market From Rate Hike

The Nigerian stock market has exhibited resilience, buoyed by the shares of companies associated with four Nigerian billionaire businessmen, despite the Central Bank of Nigeria’s (CBN) significant interest rate hike last month.

In the first Monetary Policy Committee meeting under Governor Olayemi Cardoso, the CBN increased the monetary policy rate (MPR) by 400 basis points to 22.75%, among other fiscal adjustments, which typically would divert investments away from equities.

Given the central bank’s disposition to deploy orthodox monetary policy tools (like OMO auction) to mop-up excess liquidity, the rate hike decision was expected to trigger funds aways from equities as yields in the fixed-income market trended higher.

The equities market defied this expectation of bearish sentiments following buy interest driven by the recent listing of Transcorp Power stocks by introduction.

Transcorp Power listed its 7.5 billion ordinary shares on the Nigerian Exchange Limited (NGX) at N240 per share and a market capitalisation of N1.8 trillion, making the company a top-10 stock on the NGX by market capitalisation.

The stock’s price rally stood at N383 per share as of March 21, pushing the capitalisation higher by N1 trillion to N2.87 trillion.

Topmost on the list of stocks that helped the market defy the impact of rates hike is Geregu Power, which as at March 21 was up this year by 150.6 percent as against the NGX All Share Index (ASI), which was up by 39.60 percent.

Also, while Dangote Cement was up by 114.7 year-to-date, the Transnational Corporation of Nigeria was up 72.1 percent and Transcorp Power rose by 59.6 percent.

Other stocks that have helped the market are BUA Foods, which is up this year by 96.4 percent; FBN Holdings, 60.5 percent; and BUA Cement, 47.6 percent.

In early trading this year, Femi Otedola was the prime mover of prices in the Nigeria stock market, analysts had noted. His interest in shares of Dangote Cement and that of Transcorp pushed their prices higher.

FBN Holdings, whose flagship arm is First Bank, recently appointed Otedola, the billionaire businessman and investor, as the new chairman of its board of directors.

With a total wealth of $1.1 billion, Otedola was ranked as one of the top 20 richest person in Africa by Forbes on January 22, 2024 — making him the fourth richest Nigerian.

Otedola is also the chairman of Geregu Power. Geregu Power, which Otedola took public in October 2022, accounts for about nine percent of Nigeria’s grid electricity.

Earlier this year, he was also in the news for his recent acquisition of shares in Dangote Cement, an investment that has since been linked to the increase in the market capitalisation of the cement maker.

Otedola said his interest in Dangote Cement shares underscored the company potential, emphasising long-term wealth preservation, export potential and shareholder value in Dangote Cement share acquisition.

Before this, he had offered to acquire majority stake in Transcorp Plc, a move his co-billionaire Tony Elumelu didn’t allow, despite the positive impact on the pricing of the shares of the conglomerate.

Other stocks like Tripple G (+92.1percent), Seplat Energy (+45.9percent), Meyer (+56percent), Wema Bank (+48.2 percent), and PZ Cussons (+49.8percent) have all outperformed the market benchmark index this year.

As at March 21, the NGX ASI and equities market capitalisation of the 155-member companies increased from preceding trading day’s lows of 104,256.81points and N58.947 trillion respectively to 104,387.47 points and N59.021 trillion.

The February 2024 Consumer Price Index report released recently by the National Bureau of Statistics (NBS) showed that Nigeria’s headline inflation printed at 31.70percent year-on-year (y/y) compared to 21.91percent y/y recorded in February 2023.

Cardoso said, “Given the imperative to curb inflationary pressures, which could pose social challenges and impede long-term growth prospects, I am persuaded that the MPC must adopt an assertive stance by tightening monetary policy measures, with a medium-term inflation target of 21.40 percent by the end of 2024 in mind.”