Stocks at the Nigerian capital market fell 3.6 percent to near a three-and-half-year low on Wednesday after the naira hit a new trough of 300 per dollar on the black market, weighed down by sliding oil prices and the central bank decision to curb dollar supply.
The stock index, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, fell to 25,206 points, dropping to levels last reached in September 2012. The index is down 9.1 percent in its eight days of trading this year, after shedding 17.4 percent last year.
The market recorded only three gainers led by Ashaka Cement with a gain of N2.26 gain or 9.32 per cent to N26.50 followed by Custodian and Allied Insurance with a gain of N0.14 or 3.45 per cent to close at N4.20 followed by NEM that gained N0.02 or 3.08 per cent to close at N0.67 per share.
On the other hand, Okomu Oil topped 34 stocks on the losers’ chart with N3.51 loss or 9.71 per cent to close at N32.64 followed by Zenith Bank that lost 1.15 or 9.52per cent to close at N10.93 per share, and Ikeja Hotel that lost N0.31 or 9.48 per cent to close at N2.96 per share.
All together, a total of 369,233,091 shares worth N1.689 billion exchanged hands in 2,887 deals.
In a similar vein, currency and stock markets have been hard hit by the persistent fall in crude,, triggering a fall in government revenues and exit of foreign investors from the local bourse.
Brent crude, which gives Nigeria around 95 percent of its foreign earnings, fell to $30 a barrel for the first time in twelve years on Tuesday.
“With pressure on foreign reserves and oil prices at $30 per barrel, devaluation is now unavoidable. The issue will be the quantum and methodology,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank.
The reaction has been mostly triggered by the continuing fall in oil prices. On Tuesday, oil prices fell below $30 per barrel for the first time in twelve years. Nigeria has been particularly hit by the oil price crisis as the resource contributes more than 70% of its earnings.
“The major factor is the oil price that has weakened further,” Pabina Yinkere, analyst at Vetiva Capital Management Ltd told Bloomberg. “That has implications for the nation as an oil-dependent country. It has created a heightened risk environment.”
The ‘heightened risk environment’ has been exacerbated by Nigeria’s Central Bank’s currency policies. Faced with falling external reserves, the apex bank set up strict foreign exchange restrictions which were criticized as they badly affected lives of Nigerians.
Those restrictions were lifted recently but the Central Bank’s decision to stop selling dollars to foreign exchange local dealers has resulted in even more instability in the market.
The central bank on Monday stopped the sale of dollars to retail foreign exchange operators saying they were using up the country’s foreign reserves for illegal transactions and selling the dollar above the bank’s official rate of 197 naira.