Nigeria Stocks Fall Most Since 2010 as Investors Fret Over Naira
Nigeria Stocks Fall Most Since 2010 as Investors Fret Over Naira
The Nigerian benchmark stock index fell the most in 10 years Tuesday as the crash in oil prices stirred concerns among some investors that Africa’s largest producer of crude may be pushed to devalue its currency, curbing the ability of foreigners to extract their funds.
The Nigerian Stock Exchange All Share Index slumped 4.9% by the close in Lagos, the sharpest decline since March 2010, and falling for a third day to a four-year low. Bank stocks, the most liquid sector on the exchange, saw the worst of the sell-off, tumbling 13%, the most since 2012 and stretching their losses over the past three days to 23%.
The plunge in oil is piling pressure on Nigeria to devalue the naira as dwindling export revenue depletes foreign-exchange reserves, curbing the central bank’s ability to support the currency. Reserves have decreased by 20% in the past two years to the lowest since November 2017, and may soon reach the $30 billion threshold set by Governor Godwin Emefiele for the country to consider a devaluation, Societe Generale SA analysts wrote on Monday.
“Some of the signals they have put in place, which includes oil prices, have been triggered,” Jolomi Odonghanro, head of research at Codros Capital in Lagos, said by phone. “When crude oil prices are low, that immediately draws into question Nigeria’s ability to defend the currency and the likelihood of devaluation becomes high.”
Nigeria’s budget is based on a crude oil price projection of $57 a barrel and targeted oil earnings of 2.64 trillion naira ($7.9 billion). But Brent crude prices have slumped more than 40% this year to around $37 a barrel. Nigeria relies on earnings from oil for more than 90% of its export revenue. The International Monetary Fund slashed its forecast for economic growth in the West African country to 2% from 2.5% because of the decline in oil.
A devaluation would lead to dollar shortages, limiting foreign investors’ ability to get their money out of the market, Odonghanro said. “It’s reminding them of 2016 when there was a sudden fall in the price of crude oil.”
Among major decliners, Stanbic IBTC Holdings Plc, MTN Nigeria Communications Plc, Fidelity Bank Nigeria, and Dangote Sugar Refinery Plc all fell by the maximum-allowed 10%. Guaranty Trust Bank, Nigerian Breweries Plc and Union Bank Nigeria Plc were among stocks to close 9.9% lower. Nigeria was among the worst-performing markets globally Tuesday, based on 94 benchmarks tracked by Bloomberg.
--With assistance from Robert Brand.
To contact the reporter on this story: Tope Alake in Lagos at talake@bloomberg.net
To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, James Cone
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