If you have ever watched a Nigerian stock move 10% and wondered what happened, you are asking the right question. The frustrating answer is that there is rarely just one thing.
Stock prices reflect expectations, and expectations can change quickly.
Earnings
If a company reports much stronger earnings than investors expected, the stock may rise. If earnings disappoint, it may fall. The important word is expected.
A company can report record profit and still fall if investors expected even more.
Dividends
Dividend announcements can affect prices, especially for companies popular with income-focused investors. But the market considers sustainability, not just the headline amount.
Interest rates
Higher rates can make fixed-income investments relatively more attractive and increase borrowing costs for companies. Lower rates can have the opposite effect.
Stocks should not be analysed completely independently of the broader financial environment.
Inflation
Inflation affects consumers and companies. A company may raise prices to protect margins, but customers may respond by buying less. Costs such as wages, transport, energy and raw materials may also rise.
The naira and foreign exchange
For companies with foreign-currency exposure, exchange rates can have large effects. A weaker naira may increase the cost of imported inputs, while companies earning foreign currency may benefit in some circumstances.
Sentiment and liquidity
Sometimes investors simply become more optimistic or pessimistic. Some stocks also trade far less actively than others, so relatively small trades can move prices.
Liquidity matters when entering or exiting positions.
Government policy
Policy can affect entire sectors. Taxation, regulation, import rules, energy policy and industry-specific rules can alter company economics.
Expectations are everything
Stocks do not react only to what happened. They react to what happened compared with what investors expected.
Do not try to explain every daily movement. Focus on material changes: earnings, guidance, dividends, capital raises, debt, management, regulation and industry conditions.
The market is noisy. Your job is to find the signal.