Investors quit as Nigerian stocks fall to 3-yr low

Stocks on the Nigerian bourse (NSE) fell to a three-year-low on Monday, as the all share index dropped 0.8 percent to 27,385.69, the lowest since December 2012.

The decline on the Nigerian bourse ended the month of November, experiencing a decline in its share values on all but three days trading days in the entire month.

Experts have blamed the plunging stocks on the exit of investors from the Nigerian market, following what they referred to as the “lack of economic direction” by the government.

Pabina Yinkere, an analyst at Vetiva Capital Management, told Bloomberg on Monday that “the government has not come up with a definitive policy for the economy,” adding that “the continued lack of clarity is affecting the stock market”.

Some other analysts believe that the position of the Central Bank of Nigeria (CBN) has been hurting the economy, directly and indirectly.

According to Bloomberg, Alquity Investment Management and Duet Asset Management have lowered their Nigerian exposure due to the bank’s position.

The firms believe that Godwin Emefiele, governor of the Central Bank of Nigeria, will be forced to devalue the naira, which would cause losses on holdings in foreign-currency terms.

David McIlroy, Alquity’s chief investment officer, added that the recent interest rate cut by the CBN, will heap more pressure on the naira.

“The surprise reduction in rates has probably worried international investors even more. 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,” he said.

“We’ve increased our positions in Egypt and Kenya at the expense of Nigeria.”

Renaissance Capital, a leading Russian investment banking firm with focus on emerging markets, also communicated to its clients that equity funds are more underweight in Nigeria than any other frontier and emerging market, except for Kuwait and Morocco.