- February was a month to forget for Nigerian cement companies trading in Nigerian Stock Exchange (NSE)
- The shareholders of Dangote Cement, BUA Cement and Lafarge Africa recorded major losses caused by dwindling market capitalisation
- Open market operation becomes more appealing for investors than the stock market.
The setback started in the second week of last month, as stock prices of cement companies began to fall like snowflakes due to sell-offs among investors. This action had a negative impact on the value of cement companies on the Nigerian bourse.
Breakdown of the losses by investors
As stock price plummeted, so was the company value of Dangote Cement, BUA Cement and Lafarge. At the beginning of February, the three companies had a combined worth of N7.18trillion market capitalisation.
Note that Dangote Cement, with the largest market share, accounted for N4.02trillion, BUA Cement held N2.68trillion, while Lafarge completed the circle with N483billion.
In the first week of February, Dangote Cement was trading at N230 per share, BUA Cement sold a share for N79, and Lafarge share price was at N26.65kobo per share.
The second week of February came, and the cement companies became weak against the month that cost the Nigerian bourse N1.37trillion.
But the market capitalisation of Dangote Cement fell from N4.02trillion at the start of February to N3.74trillion by Wednesday, March 3, 2021. BUA's market value also plunged to N2.53 trillion from N2.68 trillion during the same period.
Lafarge was not left out, as its market capitalisation fell from N483 billion at the start of February to N314 billion as of March 3, 2021. This put the worth of the three rivals at N6.58 trillion, as of March 3, 2021. It also reflected that the value of the three companies fell by 8.3% in February.
Reports showed that in one month, Dangote Cement lost N280 billion, making the Aliko Dangote-owned company the biggest loser among the cement manufacturers at the stock market, while Lafarge lost N169 billion and BUA shed N150 billion - this is a total loss of over N590 billion.
In the same vein, the share price of Dangote Cement declined from N230 per share to N220 during the period under review, losing N10 in share price. BUA stock price dipped to N75 per share, after losing N4 in share price, and Lafarge lost N7.15kobo in its stock price.
Reason investors lost
The share price of Dangote Cement had enjoyed a year of growth having started January 2020 at N172, but sat comfortably on N244.90kobo per share by the first week of January this year.
The BUA Cement stocks had traded below N34 per share in the first quarter of last year but rose to N85 per share during the first week of January in 2021. Lafarge share price was N13.80kobo as of January 2020, before hitting N21.05 in the same month and period this year.
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The growth across the cement market within a year triggered profit-taking among investors, including long-term and short-term holders. These investors cash in on their gains, thereby, crashing the cement market and affecting shareholders that decided to hold for long.
Aside from having to protect their profit, investors behind the sell-off could have been motivated by the Central Bank of Nigeria (CBN)'s decision to raise interest rate on debt securities, which the apex bank had reduced last year to channel investment into the Nigerian stock market.
Investors are constantly searching for opportunities to grow their wealth, and open market operation is currently more appealing than the stock market.
Meanwhile, Legit.ng earlier reported that Bitcoin is aiming for Gold's seat as the most valuable store of value asset following a surge in price that has propelled Bitcoin's worth closer to the price of a kilogram of Gold.
Since the creation of Bitcoin by Satoshi Nakamoto in 2009, Bitcoin had surpassed Gold kilogram price twice, first in March 2017 and then in February this year. While Bitcoin had falling behind everytime it surpasses Gold, it shadow remains visible.
Fakoyejo Olalekan is a Business and Financial Journalist with over three years of experience in covering finance and business activities within Nigeria and offshore. Prior to joining Legit.ng, he worked at Nairametrics where he wrote financial and investments analysis articles. Olalekan is a resourceful and result-driven journalist with a track record for conducting extensive research and interviews to produce articles that provide different perspectives to market activities.