An economy disrupted by Covid-19 and the drop in profitability on loans granted to the federal State due to rising prices, have prompted Nigerian investors to seek refuge. The local stock market was one of them, which had a very positive impact on its annual return

The Nigerian All Share Index, which represents all companies listed on the Lagos Stock Exchange in Nigeria, grew by 47.3% during 2020, according to data from the Capital IQ platform. This is the best performance of stock indices in the world over the period. It is ahead of benchmarks such as the S&P 500, which includes the 500 largest companies on American stock exchanges and which grew “only” by 15.9% over the

Following purely financial logic, investments only invest in relation to margins. From this point of view, each position acquired on the Lagos Stock Exchange generated a more attractive return than if it had been taken on the 500 largest American companies.

Under these conditions, the Nigerian All Share Index has also been better than indices such as the MSCI Frontier Market Africa, which brings together the 28 largest companies listed on 13 African financial markets, and which posted a return of -2.1% over the period.

The Nigerian index was also better than the CAC 40, which includes the 40 largest listed companies in France (8.1%), the Moroccan MASI (-6.8%) and the top 10 companies listed on the UEMOA Regional Stock Exchange (- 10.8%). The performance of the Nigerian stock market is finally almost twice as good as that of the same period in 2019 (+27.4%

This trend may be surprising, especially as Africa's largest economy in terms of Gross Domestic Product experienced its second recession in five years during the year, hampered by a marked drop in oil prices, its main export product, and by the negative effects of the Coronavirus pandemic. There has also been a continued divestment of persons not resident in Nigeria on this stock market

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The Nigerian index is better than the S&P 500 - Source: Capital IQ

But there is a reason for this performance. During the year, the lockdown imposed by the federal government of this country was added to the closure of borders with neighboring countries. In this context, people and structures with savings had no choice but to put their money on debt securities issued by the State. Strong demand for these products has caused a historic drop in interest returns

The Nigerian stock market: a haven for investors against rampant inflation.

In addition to this drop in interest, inflation (price increases) reached levels that had not been seen in 3 years (just over 14%), reducing to zero the small margins generated on government bonds. With foreign investors leaving Nigeria, shares in listed companies proved to be more accessible and profitable, justifying the strong growth of the

The evolution should depend on the progression of the global context of the pandemic, but also on the direction of oil prices, two important factors for the recovery of Nigeria's economy. The federal government has also decided to reopen its borders. This should drive down inflation, particularly food inflation, and restore interest on short-term government bonds

It should also be said that this profitability of the Nigerian stock market is relative. The Ecofin Agency was able to note that, in absolute value, the global stock market capital generated by the Top 20 listed companies in Africa, including 2 from Nigeria, was only $28.8 billion, compared to more than 3.9 trillion $ for the same group of companies on the North American financial markets, and nearly 1017 billion $ for the Asian one. And China aside, the factor of stock market speculation has taken precedence over that of the performance of the real economy