Lagos: The stock market closed on a negative note on Thursday, as investors lost N1.92 trillion amid sell-offs in banking and cement stocks.
This comes amid reactions to the Central Bank of Nigeria (CBN) ‘s new regulatory guidelines on foreign subsidiaries of banks.
Market capitalisation dropped from N155.780 trillion to N153.858 trillion, recording a decline of N1.23 per cent or N1.922 trillion.
The All-Share Index (ASI) also fell by 1.23 per cent, or 2,994.90 points, to close at 239,734.61, from 242,729.51 previously.
The Year-to-Date (YTD) return moderated to 54.82 per cent.
Mr Tajudeen Olayinka, an investment banker and stockbroker, explained that the decline resulted from investors responding directly to the new CBN directive affecting banks with foreign subsidiaries.
According to him, the guideline required banks operating abroad to limit investments in foreign subsidiaries to 10 per cent of their equity capital or shareholders’ funds.
Olayinka told journalists that the apex bank also directed banks that are currently above the threshold to begin divesting from such subsidiaries.
He stated that the decline in the ASI and market capitalisation was due to immediate investor reactions to the CBN’s guideline mandating that banks with foreign operations limit investment in subsidiaries to 10 per cent of their equity capital or shareholders’ funds, triggering concerns over future bank profitability and strategy.
Olayinka stated that the market interpreted the Olayinka stated that the market interpreted the CBN’s move as effectively integrating the revenues and other reserves of foreign subsidiaries into banks’ existing regulatory capital, potentially limiting corporate payout capacity or making future payouts dependent on growth trajectories.
Olayinka noted that the CBN’s guidelines prompted significant repricing of international banking stocks, triggering a ripple effect that affected other large-cap stocks, especially cement companies.
“So, prices of many of the international banks came down heavily by way of repricing.
“This was followed by declines in prices of highly capitalised listed companies like cement,” he said.
He, however, described the development as temporary, noting that the affected banks remained fundamentally strong and undervalued.
“I think the development is temporary, as the affected banks are already well capitalised and largely undervalued.
“Therefore, the upside potential for the banks is very high, suggesting that anyone selling off banking stocks at this time might actually be throwing away good money.
“This is because the industry is now very strong and highly regulated. The liquidity hasn’t gone away,” Olayinka said.
Meanwhile, the market breadth closed positive, recording 42 gainers against 30 losers.
CAP and FTN Cocoa Processors led the gainers’ chart by 9.99 per cent each, closing at N212.50 and N8.04 per share, respectively.
Berger Paints, Zichis Agro Allied Industries and Meyer lost by 9.97 per cent each, settling at N98.75, N30.33 and N17.10 per share.
Conversely, University Press led the losers’ chart by 10 per cent, finishing at N4.50, Red Star Express trailed by 9.59 per cent, ending the session at N25.45, while Skyway Aviation Handling Company dipped by 8.63 per cent, closing at N130.75 per share.
Also, Cileasing shed by 8.50 per cent, settling at N7, and Consolidated Hallmark lost by 7.54 per cent, finishing at N6.01 per share.
Market activity improved for the day, as total traded volume rose by 29.34 per cent to 1.83 billion shares worth N72.17 billion exchanged in 81,131 deals.
NEM Insurance recorded the highest traded volume with 360.56 million shares, accounting for 19.70 per cent of the day’s total volume.
Overall, while the market suffered steep losses due to regulatory changes, analysts suggest that strong fundamentals may support a future recovery, reflecting both the volatility and resilience of the market environment.
