Nigeria’s stocks headed for their lowest close in almost three years as foreigners exited the market amid fading hopes that President Muhammadu Buhari’s government can revive an economy growing at its slowest pace this century.
The Nigerian Stock Exchange All Share Index fell 1.2 percent to 27,294.27 at 1:36 p.m. in Lagos, the lowest on a closing basis since Dec. 2012. The gauge has declined on 18 out of 21 trading days in November and is headed for a monthly drop of 6.5 percent.
“The government has not come up with a definitive policy for the economy,” Pabina Yinkere, an analyst at Vetiva Capital Management Ltd., said by phone from Lagos. “The continued lack of clarity is affecting the stock market.”
While Buhari, a 72-year-old former general who came to power in May, has prioritized stamping out corruption in Africa’s biggest economy and oil producer, investors have been irked by a delay of more than five months in forming a cabinet, and his support for the central bank’s currency-trading restrictions that are choking businesses of the dollars they need to pay foreign suppliers.
More than two stocks declined for every one that rose. Nigerian Breweries Plc, the country’s biggest beer-maker that is controlled by Heineken NV, fell 1.7 percent to 118 naira ($0.59). The company, whose stock declined 29 percent this year and which imports about 40 percent of its inputs, said this month it had approached the central bank about the scarcity of foreign-exchange.
Guaranty Trust Bank Plc, the nation’s biggest lender by market capitalization, dropped 2.7 percent to 20 naira ($0.10). The stock is down 20 percent this year. The overall index has plunged 21 percent this year, the most in sub-Saharan Africa after the Zimbabwe Industrial Index.
Specialist African funds including Alquity Investment Management Ltd. and Duet Asset Management Ltd. have lowered their Nigerian exposure because they think central bank Governor Godwin Emefiele will be forced to devalue the naira, which would cause losses on holdings in foreign-currency terms. Last week’s interest rate cut by the central bank, its first in six years, will heap more pressure on the currency, according to David McIlroy, Alquity’s chief investment officer.
The naira was unchanged at 199.05 per dollar and has been all but fixed at 198-199 since early March. Forward prices suggest it will weaken 18 percent to 242.5 in a year.
Pressure on Currency
“The surprise reduction in rates has probably worried international investors even more,” McIlroy said by phone from London. “Given the inflation rate is above the central bank’s target, there’s pressure on the currency and they need to attract foreign capital, you’d expect interest rates to be rising.”
Alquity held about seven Nigerian stocks at the beginning of 2015, including Guaranty Trust Bank and Zenith Bank Plc. It now holds only Dangote Cement Plc. Equity funds are more underweight in Nigeria than any other frontier and emerging markets bar Kuwait and Morocco, analysts at Renaissance Capital Ltd. said in a Nov. 23 note to clients.
“We’ve increased our positions in Egypt and Kenya at the expense of Nigeria,” McIlroy said.
Nigeria is reeling from crude prices that have plunged 57 percent since June 2014. Growth will fall to 3.2 percent this year from 6.3 percent in 2014, according to a Bloomberg survey of economists. That would be the slowest pace since 1999. Annual inflation was 9.3 percent in October, higher than the central bank’s target of 6 to 9 percent.