Nigerian stocks fell to a three-month low and the naira hit a new record low on the parallel market on Wednesday, as investors who were worried about a shortage of dollars on the currency market sold shares, traders said.
The Nigeria Stock Exchange (NSE) , which has the second-biggest weighting after Kuwait on the MSCI frontier market index, dropped for the sixth consecutive day as investors pulled out of equities to short-dated Treasury bills in search of yield.
Investors had hoped for a sustained rally after smooth elections in March. But markets have taken a hit from worries over the continued slide in the naira and the impact of persistently low oil prices on government finances.
“We believe the uncertainties within the forex market may have triggered further sell-offs by foreign portfolio investors,” said Ayodeji Ebo, head of research at Afrinvest.
“The persistent pressure and increased (dollar) demand suggest a devaluation of the naira is imminent,” he added.
The central bank, worried about rising inflation, has said it is in no mood to devalue the naira again, after it tightened access to hard currency for the import of a wide range of goods.
Since the central bank measures, the naira has weakened steadily on the parallel market, hitting a new record low of 233.50 to the dollar on Wednesday.