Markets were rattled and all asset classes trading in Nigerian financial markets fell last week on the news that the Nigerian President Goodluck Jonathan had suspended outspoken central bank Governor Sanusi Lamido Sanusi, barely three months to the end of his five year tenure.
Bond markets froze, equities tanked and the naira traded at its lowest levels since 1999.
The Central Bank of Nigeria was seen by foreign investors and most analysts as one of the more credible institutions, which had made the biggest strides in building credibility in Nigeria’s financial markets the past few years, particularly under Sanusi’s governorship.
There are some concerns that the institution may have been compromised and its independence eroded, with the President’s actions to suspend Sanusi, which is unprecedented in an emerging and developed markets context.
• The naira weakened as much as 3.2 percent to N168.90 per dollar after news about Sanusi’s suspension filtered out on Thursday, while stocks fell again on Friday, as the NSE – ASI shed 520.45 points or 1.34 percent to close at 38,295.74 points, bringing year to date losses to – 7.34 percent.
• There are fears that Jonathans decision to suspend Sanusi indicates that political calculations before elections next year may be trumping economic policy considerations even as foreigners pull money out of emerging and frontier markets, including Nigeria.
• The real questions for investors are what next, and if this is a temporary blip or a mortal wound to Nigeria’s story as an attractive investor haven?
• We believe that while the Presidents action to suspend Sanusi is imprudent, it is only a temporary set-back to the bigger picture of the Nigerian growth story.
• A pointer to that attractive story is the fact that Nigerian companies signed more than $13 billion of syndicated debt last year, four times the amount raised in 2012, according to data compiled by Bloomberg.
• The theme ‘buy when there is blood on the streets’ or when others are fearful and sell when there is exuberance should be the guiding principle for investors in spite of the negative fallout from the Sanusi suspension.
• In the meantime a lot of stocks are currently on sale. For example Guaranty Trust bank – regarded as the best in class bank in Nigeria among its peers – is currently trading at N23.67 per share. Just as recently as one month ago (Jan. 23) it traded at N28.5, meaning it is down some 20 percent in 30 days.
By: PATRICK ATUANYA & BALA AUGIE
