The Nigerian banking sector is gradually recovering from a significant decline in April, which saw the sector’s index drop by 24% to close at 774 index points.
Over the past 14 weeks, the sector has shown signs of a bullish turnaround, slowly correcting the steep losses it experienced.
The downturn was largely driven by the recapitalization policy implemented in April 2024, which dampened investor sentiment in banking stocks.
As a result, the NGX Banking sector, as tracked by the NGSEBNK10, fell sharply by 24% from the end of March as investors remained cautious, waiting to see how banks would respond to the new policy.
However, the sector has been in recovery mode over the past 14 weeks, attempting to regain the points lost in April. As bullish activity begins to emerge in certain stocks within the index, there is growing potential for the index to recover to its March high of 1,029 points.
What to know
Positive price movements are beginning to emerge in the sector, with individual stocks experiencing bullish appreciation in August. Large-cap banking stocks are showing signs of recovery, as positive price action increases.
Trading volume has been particularly robust among some of the FUGAZ stocks, contributing significantly to the monthly volume recorded by the index in August.
By the close of trading on August 27th, a combined trading volume from First Bank, UBA, and Zenith Bank reached up to 49 million shares, accounting for 73% of the most traded volume for the week.
Banking vs. Other Sectors
In August, the NGX Banking sector outperformed many other sectors, alongside the Oil & Gas and Insurance indexes. According to the market report for the week ending August 23, 2024, the banking index performed positively, trailing behind the Insurance and Oil & Gas indexes.
- The Oil & Gas index saw an appreciation of 3.54%, followed by the Insurance index, which increased by 1.90% compared to the previous week’s closing price. The Banking sector index recorded a modest gain of 0.37%.
- In contrast, the Consumer Goods and Industrial Goods sectors ended the week in negative territory, with the latter declining by 4.94% compared to the previous week. The Consumer Goods index also fell by 1.42%.
The NGX Banking index reflects a similar pattern to the all-share index, which also experienced a drop of up to 6% in April. However, unlike the all-share index, the banking index is gradually correcting the losses it incurred in April.
As the sector continues its recovery, investors are closely monitoring the market for further signs of positive momentum and potential gains in the coming weeks.