The Nigerian stock market reached an all-time high on Tuesday, July 11th, with the Nigerian Exchange All Share Index closing at 65,669.29. This surpassed the previous high set 15 years ago in February 2008, which marked the peak of the stock market boom in the early 2000s.
It is worth noting that the month is not yet over and stock prices could still fluctuate. However, if the current bull run continues until the end of July, it is expected that the All Share Index will reach even higher levels.
The stock market boom in 2008 was driven by private placements that turned into initial public offerings, rights issues, and public offers, attracting investments from a retail investor market. Margin lending, involving borrowing money from commercial banks to invest in the stock market using equities as collateral, also played a significant role. Inflows in 2008 reached a massive N4.6 trillion, with foreign and domestic participation at N3.9 trillion and N787 billion, respectively. However, the market eventually crashed, hitting its lowest point at 19,825.1 in March 2009.
The current bull run is different from the 2008 scenario. There is no frenzy of margin lending or public offerings attracting retail investors. Instead, the market is being driven by positive policy decisions, investments from billionaires, and a gradual return of foreign investors. Successful elections, revised forex policies, and the removal of fuel subsidies have boosted investment sentiments. Capital inflows in the stock market have also increased, with approximately N1 trillion recorded in the first five months of this year compared to N1.5 trillion for the whole of 2022.
Despite the significant bull run, capital inflows in the stock market are not expected to reach the same levels as in 2008. Nigerian equities currently trade at a price-to-earnings multiple of 11.77x, higher than its emerging market peers such as South Africa, Egypt, Kenya, and Ghana.
