Nigeria’s stocks fell to their lowest level in almost three years as
foreigners exited the market amid fading hopes that President Muhammadu
Buhari’s government can revive an economy growing at its slowest pace this
century.
The Nigerian Stock Exchange All Share Index dropped 0.8 percent to
27,385.69 at close in the commercial capital of Lagos, the lowest since
December 2012. The gauge declined on all but three trading days in
November for a monthly drop of 6.2 percent.
“The government has not come up with a definitive policy for the economy,”
Pabina Yinkere, an analyst at Vetiva Capital Management Ltd., said by
phone from Lagos. “The continued lack of clarity is affecting the stock
market.”
While Buhari, a 72-year-old former general who came to power in May, has
prioritized stamping out corruption in Africa’s biggest economy and oil
producer, investors were irked by a delay of more than five months in
forming a cabinet, which he swore in Nov. 11. There’s also concern that
his support for the central bank’s currency-trading restrictions are
choking businesses of the dollars they need to pay foreign suppliers.
Almost two stocks declined for every one that rose. Guaranty Trust Bank
Plc, the nation’s biggest lender by market capitalization, dropped 2.7
percent to 20 naira ($0.10). The stock is down 21 percent this year, about
the same as the overall index. That’s the biggest fall in sub-Saharan
Africa after the Zimbabwe Industrial Index.
Specialist African funds including Alquity Investment Management Ltd. and
Duet Asset Management Ltd. have lowered their Nigerian exposure because
they think that central bank Governor Godwin Emefiele will be forced to
devalue the naira, which would cause losses on holdings in
foreign-currency terms. Last week’s interest rate cut by the central bank,
its first in six years, will heap more pressure on the currency, according
to David McIlroy, Alquity’s chief investment officer.
The naira was unchanged at 199.05 per dollar and has been all but fixed at
198 to 199 since early March. Forward prices suggest it will weaken to
241.25 in a year.
Pressure on Currency
“The surprise reduction in rates has probably worried international
investors even more,” McIlroy said by phone from London. “Given the
inflation rate is above the central bank’s target, there’s pressure on the
currency and they need to attract foreign capital, you’d expect interest
rates to be rising.”
Annual inflation was 9.3 percent in October, higher than the central
bank’s target of 6 percent to 9 percent.
Alquity held about seven Nigerian stocks at the beginning of 2015,
including Guaranty Trust Bank and Zenith Bank Plc. It now holds only
Dangote Cement Plc. Equity funds are more underweight in Nigeria than any
other frontier and emerging market, except for Kuwait and Morocco,
analysts at Renaissance Capital Ltd. said in a Nov. 23 note to clients.
“We’ve increased our positions in Egypt and Kenya at the expense of
Nigeria,” McIlroy said.
Nigeria is reeling from crude prices that have plunged 57 percent since
June 2014. Economic growth will slow to 3.2 percent this year from 6.3
percent in 2014, according to a Bloomberg survey of economists. That would
be the slowest pace since 1999.
Bloomberg