Stocks on the Nigerian exchange plunged to their lowest level in more than two years on Wednesday amid lingering pessimism which has pushed year’s loss to double-digits.
The benchmark index at the Lagos bourse dipped 0.56 percent to 28,043.32 index points to extend a six-day losing streak, threatening a break below the 28, 000 level. This is the lowest since May 2017.
The uninspiring performance of the domestic bourse is fuelled by the failure of President Muhammadu Buhari to spur interests of foreign investors who are keen about the policy direction of the present administration, analysts say.
“It is indicative that investors have weak appetite for Nigerian stocks” said Gbolahan Ologunro, equity analyst at Lagos-based CSL Stockbrokers said in a telephone interview. “Investors are not seeing expected reforms required to push up the market”
So far this year, the market has lost some 10.78 percent, a counter-trend to the positive returns in most emerging markets stocks.
While investors await the implementation of stimulating policies and the formation of Buhari’s cabinet, the calibre of ministers to hold key positions is expected to influence investors’ betting on naira stocks.
“There may be no significant change in current trend even if ministers are appointed,” Emeka Nwagwu, equity analyst at Lagos-based Axe Capital, said in an emailed response. “It is only when Federal Government effects business-friendly policies that the market can revive”
The recent directives of the Central Bank of Nigeria to compel money lenders to give loans to small businesses in a bid to boost growth is also weighing on sentiments as investors fear it might drag profitability.
Bank stocks, the most liquid and active on the Nigerian exchange, lost 1.4 percent after Wednesday’s trade, to emerge second-worst performer in the day’s trade. Shares of lenders are down some 16 percent year long.
“It is likely that the new CBN policy on banks’ lending will affect the capital market but the degree of impact depends on how they handle it,” Nwagwu added.
A gauge of Nigeria’s thirty most liquid and capitalized stocks, which accounts for over 90 percent of market value, lost 0.83 percent on Wednesday compared to a 0.43 percent dip a day earlier.
Across sectors, performance was bearish as all the five sectors covered closed in red, with insurance stocks bottoming.
Two conglomerates, United Africa Company of Nigeria and AG Leventis led the pack of gainers, while Nestle, the company with the highest share price on the exchange, topped decliners.
President Buhari last week noted that he is taking his time to select cabinet members that would work with him in his second tenure bill to end 2023, despite pressures being mounted on him.
Israel Odubola & Segun Adams
