Nigerian stocks on Monday slumped by the most in over two years after top-producer Saudi Arabia started a price war that pushed oil to record-low and triggered fears of a free-fall in the commodity’s value.
The main equity gauge fell 2.41 percent – the heaviest decline since a 2.41 percent drop on Feb 13, 2018 – to a year-low of 25,648.61 points, while banking stocks slumped by 8.95 percent, the most since June 2013.
“With the wide spread of COVID-19 inducing a four-year low in global crude oil prices, we believe the dark clouds are gathering,” said Lagos-based Afrinvest in a note to clients.
Analysts at the investment bank expect investors to remain risk-averse towards the equities market in the near term, “although there is headroom for bargain hunting activities due to cheap valuation of stocks and the local bourse relative to peers”, they said.
Aderonke Akinsola, banking analyst at Lagos-based Chapel Hill Denham, said investors, lacking patience, can watch the trend before taking position in the market.
“There is still a lot of offer in the market for banking stocks,” said Akinsola, adding that the sell-pressure could subside towards the end of the week – especially with positive news on oil, the virus or policies to stimulate the economy and market.
Volume and value traded dropped by 49 percent and 57 percent to 185.6m units and N1.8bn each as investors lost N329.4bn on Monday.
Only Consolidated Hallmark gained in the day, advancing 3.7 percent to 28 kobo per share, while 11 others declined 10 percent.
Investor sentiment as measured by market breadth (advance/decline ratio) declined to 0.03x from the 1.2x recorded in the previous trading session as one stock advanced relative to the 38 that declined, said Afrinvest.
Access Bank, Conoil, United Capital, Unilever, Cornerstone Insurance, GTBank, Fidelity Bank, Oando and Stanbic IBTC were among the stocks that lost 10 percent each.
Big lenders like Zenith, First Bank, and UBA were caught in the onslaught.
Stocks saw a disappointing Monday, with five sector indices tracked by BusinessDay in the red, due to the fallout of an oil war by Saudi Arabia that caused oil price to fall by the most in over two decades to the lowest level since 2017.
Weighed by the slowing demand for oil due to the coronavirus outbreak, OPEC had sought to balance price by taking 1.5 million barrels per day out of the market.
The cartel planned to take 1 million per day while Russia and the group’s other allies contribute the other 500,000 per day.
But lack of cooperation from Russia, an OPEC ally, saw Saudi Arabia initiate a price war, ramping up output and selling oil at a record discount causing the price to fall to around $35 per barrel over the weekend.
Brent futures slightly improved to $37.41 per barrel in late trade in London on Monday.
The current price puts the stability of the naira in jeopardy and echoes the 2016 decline which threw Nigeria to its first recession in 25 years.
President Muhammadu Buhari on Monday called for an emergency meeting of top officials including Finance Minister Zainab Ahmed to assess the impact of the oil decline and Covid-19 spread on the economy following the confirmation of a second case by the Nigeria Centre for Disease Control (NDCD).
“It’s a double whammy for Nigeria,” said Gbolahan Ologunro, an analyst at CSL Stockbrokers.
Nigeria last week suffered its third downgrade from international rating agencies since December 2019, after S&P lowered its credit-worthiness on the economic impact of the coronavirus.
Year’s return in Nigerian stocks now stands at a negative of 4.44 percent.
SEGUN ADAMS
