The Nigerian Stock Exchange All Share Index yesterday fell to its lowest point since May last year as continued negative sentiment in the stock market pulled stock prices lower. At market close yesterday, the broad index fell 1.33 percent, settling at 30,611 points, its lowest level in the last 18 months.
Analysts told BusinessDay that the selloff could be attributed to the recent slide in crude oil price which declined from $86 per barrel in October 3 to $57 yesterday.
“Nigeria is heavily reliant on crude oil for export earnings. Oil exports account for around 90 percent of exports which causes its foreign external reserves to be almost as volatile as crude oil prices. Reserves have fallen by $2 billion since crude oil began to decline from its year high in early October. Foreign investors know dollars become scarce in the country during oil price meltdowns as such, this may explain the persistent stock market selloff that we are witnessing in the country today. Even in US stock prices have been on decline so the problem isn’t just local,” said Maju Eldad, lecturer in Economics department at Federal University of Kashere, Gombe State.
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The Dow Jones Industrial Average in US has lost around 1,500 points since October 3 when crude prices began to decline. The S&P 500 in US has returned -6.2 percent while the Nikkei 225 index in Japan has returned -7.6 percent during the same period. The FTSE 100 in England and MSCI World Index have also shed around 6 percent and 8.1 percent respectively since October 3 showing the strong impact dwindling crude oil prices is having on stock market performance around the world.
Falling oil prices has done Nigeria no favor, pouring flames to fire in what has been a yearlong selloff anchored on fears of election risk, rising insecurity and political uncertainty.
Year to date performance for the NSE ASI index declined to 20 percent, making 2018 the worst year for stocks since 2011 when the index fell by 23 percent.
Analysts are now forecasting that with elections now two months away, we could see another bout of selloffs in December which could easily make 2018 the worst year for stocks since 2008.
“The stock market will likely fall below the 30,000 mark in December, but we expect to see a rally in stocks after the election regardless of who wins. A conclusive election result and a non-controversial handover of power if the incumbent loses the election will be a big boost to investors’ confidence,” Eldad concluded.
Among the top gainers yesterday by index weight, Access bank returned 7.14 percent while Nigerian Breweries and Forte oil rallied 0.51 percent and 1.73 percent respectively. Among the biggest losers by index weight, Dangote Cement and Guaranty Trust Bank declined 2.63 percent and 3.65 percent respectively. Other big losers were Cadbury which fell by 5 percent, WAPCO which returned -2.25 percent and UBA which declined 4.08 percent.
IFEANYI JOHN
