The Nigerian stock market has recently been affected by the global stock market turmoil that began last Friday and has now reached the Nigerian Exchange (NGX). Midday trading on the NGX showed a 0.27% decline in the All-Share Index, with telecommunications giant MTN Nigeria experiencing a significant drop. MTN’s shares fell to N179, their lowest level since October 2021, marking a 5.79% decrease.
Several factors contributed to the sell-off of MTN Nigeria’s stock. In addition to the global market downturn, the company has faced service delivery challenges, including an increase in dropped calls since the start of August. This has added stress to the stock, which has already been unstable due to low earnings and a weak performance outlook.
The banking sector has also been affected, with stocks such as Wema Bank and GTCO experiencing declines of 4.76% and 1% in market capitalization, respectively. This local decline mirrors the broader global trend, with significant losses observed in Asian and European markets.
In Asia, Japanese stocks suffered their 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, which showed 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 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.
MTN Nigeria’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 reflected 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, potentially impacting global and local markets alike.
