Nigeria’s Economic Crisis Deepens as 74 Investors Exit Stock Market

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Nigerian stock exchange

The country’s troubled economy further bled last week as over 74 foreign investors in equities and Government (FGN) Bond markets left its shores.

Published data on forex disbursement last week showed that investors divested $6.97 million through Stanbic IBTC Bank Plc, representing over 50 per cent of $12.91 million total funds disbursed by the lender.

The foreign investors received their funds through international corresponding lenders namely MerillLynch International, HSBC, Brown Brothers, JPM Securities, The Bank of New YorkMellon 1, The Bank of New York Mellon 2, HSBC Funds Services London, Deutsche Bank London, Standard Bank of South Africa, and Credit Suisse International,among others.

The investors see foreign exchange (forex) policies of the Central Bank of Nigeria (CBN), especially its reluctance to devalue the naira, unfavourable to their investments.

The CBN’s official exchange rate remained at N197 to dollar whilst naira traded between N320 to N323/ dollar at the Bureau-De-Change and N321 to N324/dollar at the parallel market within the week.

The figures on the Nigeria Stock Exchange (NSE’s) Domestic & Foreign Portfolio report showed that Foreign Portfolio Investment (FPI) outflows stood at N58.2 billion in January and February surpassed inflows N27.95 billion by 108.2 per cent.

The reservations foreign investors hold at the moment is likely to persist until there is clear market friendly shift in forex policy direction by the monetary regulatory authority.

Analysts at Afrinvest West Africa Plc, an investment and research firm, expect that the relative calm in the forex market will spill over into this month.

However, they predict there could be a shift in the stance of the CBN on forex policies at the next Monetary Policy Committee (MPC) meeting scheduled for the 23rd and 24th of May.

“Amidst the volatility in the financial market, our analysis shows that the domestic bond market is equally being pressured by investor sentiments.

This is not unconnected with the challenges the economy is currently facing, coupled with monetary policy volatility that has weakened investor sentiments,” they said.

“Similar to March, the CBN remained unable to adequately meet dollar demands in April.

“Current Gross foreign reserves level is at $27.14 billion from $27.85 billion at the start of the month. The naira traded at the CBN and Interbank at N197 to dollar and N199.10 to dollar respectively.”

Besides, findings showed that there was a mixed outing for the equities market, as the broader index advanced on three days and declined on two days within the week.

The trend in market performance was broadly driven by investors’ reactions to corporate scorecard as well as dynamics of profit taking and bargain hunting activities.

Amidst devaluation uncertainties and shortages of forex, most foreign investors remain cautious about entering the Nigerian market whilst currency and reinvestment risks linger.



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