The Nigerian Exchange Limited (NGX) experienced a five-day rout, with investors selling off shares to raise funds for the Dangote Refinery Initial Public Offering (IPO). This led to a loss of N1.58 trillion in market value. The sell-off was driven by retail investors, high-net-worth individuals, and institutional investors repositioning their portfolios ahead of the October 13 closing date of the offer. As a result, the All-Share Index (ASI) fell 0.97% to 248,363.55 points, while market capitalization dropped to N161.26 trillion.
According to Dr. Paul Uzum, Executive Director of Halo Capital Management Limited, the rush to participate in the Dangote Refinery IPO is creating pressure on the stock market. Investors are selling existing shareholdings to raise cash for the offer, driving selling pressure across equities, fixed income, and foreign exchange markets. This shift in liquidity is pressuring the stock market while redirecting funds toward the Dangote Refinery share sale. Uzum noted that many investors are raising last-minute funds to participate in the offer, impacting the financial market.
The impact of the Dangote Refinery IPO on the NGX is evident in the market's performance. The year-to-date return moderated to 59.60%, and the market breadth ratio was 0.43x, indicating that losses outweighed gains. A total of 54 stocks declined, while 23 gained. Trading activity was mixed, with the number of deals and transaction value up 1.65% and 2.14% week-on-week, respectively. However, trading volume fell 14.22% as investors exchanged 2.72 billion shares valued at N158.42 billion in 210,385 deals.
The sectoral performance of the NGX also reflected the bearish trend. Four of the five major sectors closed in negative territory, with the Oil and Gas sector leading the decline at 3.85%. The Banking sector fell 2.64%, driven by losses in Fidelity Bank, First HoldCo, and GTCO. The Insurance sector dropped 1.74%, while the Consumer Goods sector fell 0.58%. The Industrial Goods sector was the only advancing sector, rising marginally by 0.02%.
David Adonri, Managing Director of Highcap Securities, attributed the persistent decline in the equities market to the shift in attention toward the Dangote Refinery IPO. He noted that investor enthusiasm was slowing, and the approaching deadline for the offer was drawing attention and funds away from other investment opportunities. This development illustrates how a major public offer can influence activity across different segments of the financial market.
The top gainers and losers of the week were also identified. Livestock Feeds led the gainers' table, appreciating by 47.8%. Tripple Gee followed with a 32.6% gain, while Guinea Insurance, Learn Africa, and UPDC Real Estate Investment Trust rose by 29.2%, 19.6%, and 16.2%, respectively. On the losers' table, CMFC recorded the steepest decline of 20.3%, followed by ABC Transport, which fell by 18.2%.
As the October 13 deadline for the Dangote Refinery IPO approaches, investors are expected to continue repositioning their portfolios. The duration of the bearish trend remains uncertain, given the liquidity being withdrawn from the market and the approaching 2027 general elections. The NGX is likely to experience continued volatility as investors weigh the IPO's relative appeal against their existing investments.
Key points
- The Dangote Refinery IPO has led to a five-day rout on the NGX, wiping off N1.58 trillion in market value.
- Investors are selling existing shareholdings to raise cash for the IPO, driving selling pressure across equities, fixed income, and foreign exchange markets.
- The duration of the bearish trend remains uncertain, given the liquidity being withdrawn from the market and the approaching 2027 general elections.
