The Nigerian stock market has not been immune to the recent global stock market turmoil, which began last Friday and has now reached the Nigerian Exchange (NGX).
Midday trading on the NGX revealed a 0.27% decline in the All-Share Index, with telecommunications giant MTN Nigeria experiencing a huge drop. MTN’s shares fell to N179, its lowest level since October 2021, representing a 5.79% decrease.
The sell-off affecting MTN Nigeria’s stock can be attributed to several factors. Alongside the global market downturn, the company has faced service delivery challenges, with an increase in dropped calls since the start of August.
This has increased the stress on the stock, which has been unstable due to low earnings and a weak performance outlook.
The banking sector has also been impacted, with stocks like Wema Bank and GTCO experiencing declines of 4.76% and 1% in market capitalisation, respectively. This local decline mirrors the broader global trend, with huge losses observed in Asian and European markets.
In Asia, Japanese stocks suffered the worst trading day since the 1987 “Black Monday,” with the Nikkei 225 Index dropping 12.40%. In Europe, major indices like the CAC 40 and FTSE 100 opened with declines of over 2%.
The global stock market sell-off was triggered by the release of U.S. job data for July, showing a rise in unemployment to 4.3%. This has led to fears of a recession, as the Federal Reserve’s decision to maintain high benchmark rates has strained economic activities, limiting employers’ ability to hire.
The NASDAQ and NYSE both recorded huge declines, deepening troubles about the economic outlook.
The financial issues of MTN Nigeria have been compounded by foreign exchange losses, leading to a net loss of N519.1 billion in the first half of 2024. This represents a sixfold increase from the previous year.
The company’s share price, which had reached N319.80 earlier in the year, has now plummeted to N190, reducing its market value to below N4 trillion for the first time in a long while.
Despite the global market shocks, the relatively low level of foreign participation in the NGX has somewhat insulated it from more severe impacts. Foreign investment in the NGX accounted for about N82.2 billion in June 2024, representing 23.18% of total participation. However, foreign inflows and outflows indicate a cautious perspective among investors amid the broader market uncertainty.
MTN Nigeria’s financial issues are further seen in its balance sheet, with an increase in operating expenses and net finance costs. Reports have noted the company’s negative return on assets and weak net asset value, contributing to a challenging outlook for shareholders.
The Nigerian market’s resilience is being tested as global economic problems and local challenges converge. The U.S. Federal Reserve’s upcoming meeting in September could lead to further changes in monetary policy, possibly impacting global and local markets alike.
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