Equities Market Loses N1.7trn in One Year under Buhari

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Goddy Egene

As the nation celebrates the first anniversary of President Muhammadu Buhari’s administration, the Nigerian equities market has lost N1.733 trillion THISDAY checks have shown.

Buhari was sworn in on May 29, 2015 and stakeholders have been assessing the performance of his government one year after. A look at the performance of the equities market in the last one year, shows that its capitalisation has dipped by N1.733 trillion. The value of equities market fell from N11.659 trillion to N9.926 billion, which is 17 per cent.
Market operators said the decline in the value of stocks is a reflection of the general downturn in the economy since Buhari took over.

Analysts said the market was affected by the adverse economic climate characterised by declining oil prices, rising inflation, declining capacity utilisation and job losses in the manufacturing sector, uncertainties around devaluation of the naira and the delay to the 2016 budget.

The market only rebounded this month with most of recovery made last week after the Central Bank of Nigeria (CBN) decided to adopt a flexible foreign exchange rate policy.
But for the recovery of 648 billion last week, the market would have lost about N2.376 trillion in the first year of this administration.

The uncertainty around the exchange rate has been a major concern to investor, especially foreign investors. However, the Monetary Policy Committee (MPC) last week decided to adopt a flexible exchange rate will strengthen performance of the equities market.

According to analysts at Afrinvest (W.A) Limited, the move by the MPC to address the currency market crisis was a step in the right direction.

“While we await the “modus operandi” of the new FX regime, we maintain that flexible exchange rate policy will go a long way in addressing the current spread between the official/interbank and the parallel market rate. We expect this move to help improve FX supply constraints as foreign investor sentiments improve towards Nigeria as an investment case,” they said.

They noted that foreign portfolio investors and foreign direct investors who have been staying on the side-line would find their way into the system on the back of foreign investor confidence receiving a boost as the interbank market is reinstated as the official platform for market determined exchange rate.

“We also believe sentiments for equities market, which had anticipated a currency adjustment move, had been elevated as investors await the “come back” of foreign investors who had earlier exited the market on the back of rigid foreign exchange regime,” they said.

Afrinvest added that while they hope that “Flexibility of Interbank market” is in the true meaning of the phrase, “the overall impact of the decision remains dependent on the details of the operation of the new FX rate regime most especially as it relates with transparency issues surrounding the critical sector the apex bank will be supporting.”