Why Investors Are Deserting Nigerian Stock Market
Between January and October this year, the Nigerian stock market has lost about 1.8 trillion naira.
This seems like a trend preceding election period. Around this period in 2014, ahead of the 2015 general elections, investors lost about 1.25 trillion naira.
This year’s stock market losses are compounded by foreign investors exit which is estimated at $1.5 billion, about 500 billion naira.
So, why is the stock market hemorrhaging?
According to Managing Director of Afrinvest Securities Limited, Ayodeji Ebo, several reasons account for these sell-offs in the stock market, including: improved yields in developed markets, contagion effects from emerging market and political uncertainties.
He said: “The selloffs we are seeing, we would like to attribute to several factors. (This includes) improving yield in developed markets. So, foreign investors are moving their investments to safer havens.
Ebo spoke at the pre-launch press conference of the company’s Banking Sector Report on Tuesday in Lagos.
According to him, “If you look at the moves by some of our politicians in the last two or three months, the sanction on MTN and some banks by Central Bank of Nigeria, CBN, some of these combined have led to the selloffs that we have seen.”
He, however, believes that the selloffs, which is already subsiding, will end as the market stabilizes after the elections.
“You may recall that last two or three weeks, the selloff has subsided compared to what we used to have.
“But we expect that as we approach 2019 elections, there will be continued caution in terms of the moves of government.
“In addition to that, we have also seen some local investors also trying to take positions ahead of 2019 elections to know whether it is a new government or the incumbent that will come into power.
“Most times Nigerians move on and we expect that the market will rally after the election.
“So, we expect that before the end of this year, the market will remain soft, but investors have also been able to identify stocks that have strong fundamentals. They have been taking significant positions, buying ahead of the elections.”
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