With the naira devaluation done, it was hoped that the move would pave way for the growth of banking stocks in Nigeria, but it has quickly been realized that it is not enough to save the banking Stocks or the economy.
According to a report on Bloomberg, the Nigerian Stock Exchange Banks Index has dropped by 6.3 percent since it enjoyed a rare surge on the 23rd of June. This compares with a 4.7 percent drop in the NSE All Share Index over the same period, with the stocks of banks such as Sterling Bank Plc and Unity Bank Plc declining too.
This was certainly not envisaged as the devaluation of the naira was supposed to strengthen stocks and it did, it just didn’t last long.
It was expected that foreign investors would flock back to the country after the devaluation and free trading of the naira but that has not happened especially with falling oil prices and Britain’s exit from the EU.
Bloomberg reports that investors such as AllianceBernstein LP and Loomis Sayles & Co. say the naira’s 29 percent depreciation isn’t enough and it’ll take a bit more than that to pull them back.
Jaap Meijer, the managing director of research at Dubai-based Arqaam Capital Ltd had this to say about the situation.
“The devaluation of the naira is not a silver bullet,
“There are just too many headwinds, with a devaluation probably worsening the asset quality outside the oil and gas industry.”
It’s difficult to see what the CBN will do to rectify the situation and stop the economy from going into a free fall.