by Tope Alake
Nigeria’s benchmark stock index fell for a fifth day, a slump that underscores foreign investor frustration over a lack of policy progress since President Muhammadu Buhari won re-election in February.
The index dropped 0.5% by Tuesday’s close to the lowest since May 2017. It has declined 13% in the five months since Buhari, who is still to announce his cabinet, was declared the winner of the national vote.
“We are yet to see any major policy direction and foreign investors are not comfortable with that,” said Ayo Akinyele, an analyst at CSL Stockbrokers. “We don’t have a new minister of finance — this is very critical to investors.”
The Nigeria Stock Exchange All Share Index has dropped 10% this year, compared with a 15% gain in an index of frontier markets. The latest declines have pushed the 14-day relative strength index for the main stocks gauge below 30, a level that suggests the stocks may be poised for a recovery.
Recent central bank steps to push Nigerian banks to increase lending in a bid to boost the economy is weighing further on sentiment. An index of local banking stocks has dropped 23% from its 2019 high reached in February.
“The circular from the central bank actually contributed — we saw significant sell-offs in some of the top banks,” said Ayodeji Ebo, managing director at Afrinvest Securities in Lagos.
The biggest laggards in Tuesday’s trading included Cement Co. Northern Nigeria Plc, which lost 10%, the maximum allowed, while Union Bank of Nigeria Plc declined 7%. United Bank for Africa Plc dropped 3.4% and Access Bank Plc fell 3.8%.
CSL’s Akinyele expects bearish sentiment to linger in the third quarter, potentially improving toward the end of the year. That will depend on which ministers Buhari appoints and on progress in implementing a new minimum wage and structural reforms.