- Banking index posts biggest two-day slump in 4 1/2 years
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Concern at delay in announcing forex changes, analyst says
by Emele Onu; Bloomberg
Nigerian banking stocks fell the most in more than four months as investors showed their displeasure at the lack of clarity from policymakers since they flagged a change in foreign-exchange policy more than a week ago.
The Nigerian Stock Exchange Banking 10 Index fell 6.9 percent by the close in Lagos, the biggest retreat since Jan. 15, completing the biggest two-day plunge since November 2012 after Tuesday’s 6.6 percent drop. Guaranty Trust Bank Plc, the country’s biggest lender by market value, declined 9.6 percent, the most in two months. Zenith Bank Plc fell 9.2 percent, while United Bank for Africa Plc retreated 9.5 percent, the biggest drop since March 30.
Central Bank of Nigeria Governor Godwin Emefiele said May 24 the bank would introduce a flexible exchange-rate regime to boost investments after a scarcity of dollars contributed to inflation reaching an almost six-year high of 13.7 percent in April. President Muhammadu Buhari, who has opposed weakening the currency since coming to power last year, said in a speech five days later he would keep a close watch on how recent measures affected the naira and the economy, while also saying devaluation in the past had harmed the country.
“The market may have been shocked by the body language of the president from his weekend broadcast when he mentioned that he was encouraging the CBN to initiate a flexible foreign exchange market regime, but also said he was against devaluation,’’ Pabina Yinkere, an equity analyst at Vetiva Capital Management Ltd., said by phone. “There is speculation the devaluation might not happen.’’
- See related: NewsRescue-Devaluation: Nigeria Revives Second Tier Foreign Exchange Market, SFEM To Subsidize Cabal
Authorities in Africa’s biggest economy have rationed dollars and pegged the local unit at 197-199 per dollar in the interbank market since March last year, which has hobbled companies importing raw materials and discouraged foreign investors.
“Investors expected that the framework for the flexible FX market announced by the central bank last week would have been released by now, so there is apathy,’’ Yinkere said.
The 171-member Nigerian Stock Exchange All Share Index fell 2.8 percent, extending its retreat from a six-month high reached May 27 after the central bank announced plans for a more flexible currency regime.
- See related: NewsRescue-Devaluation: Nigeria Revives Second Tier Foreign Exchange Market, SFEM To Subsidize Cabal
