NGX Market Capitalisation Plunges By $27.8bn

The Nigerian Exchange (NGX) has witnessed a significant decline in market capitalisation, dropping by $27.8 billion in just one year after the Central Bank of Nigeria’s (CBN) decision to float the naira.

This move, aimed at achieving a unified exchange rate, has had far-reaching consequences for the NGX and the broader economy.

In June 2023, the NGX market capitalisation stood at $65.5 billion, but following the naira float, it depreciated to $37.7 billion in the first half of 2024.

This decline of $27.8 billion has pushed the NGX out of the top five largest stock markets in Africa.

Initially, the unification move sparked optimism, with foreign investors increasing their participation in the NGX. However, as the naira continued to slide, investor sentiment shifted, and foreign participation dropped. Despite a recent increase in foreign participation, the NGX has struggled to recover from the initial shock.

The decline in market capitalisation can be attributed to the naira’s depreciation, which has outpaced the growth in the NGX. While the All-Share Index appreciated by 33.81 percent in the first half of 2024, the naira depreciated by 39.20 percent, resulting in a significant loss in USD terms.

This development has raised concerns about the effectiveness of the central bank’s decision to float the naira. The move aimed to stabilise the exchange rate regime, but the NGX’s decline suggests that other factors, such as currency stability, are crucial for market growth.

As the NGX navigates this challenging environment, investors and stakeholders must consider the implications of currency fluctuations on market performance. The removal of currency issues has brought other challenges to the forefront, such as investor sentiment towards the announced recapitalisation of banks.

The NGX’s decline in market capitalisation serves as a reminder of the complex interplay between currency fluctuations, investor sentiment, and market performance. As the Nigerian economy continues to evolve, it is crucial to monitor these factors and adapt strategies to mitigate potential risks.