Jittery investors sell assets as Naira sinks, stocks collapse

 

By Abimbola Tooki

Jittery investors in Nigeria are disposing off their assets due to uncertainties that pervade return on investment. The Nigerian naira fell to record lows on both the official and unofficial markets on Monday, while stocks posted their biggest one-day fall in more than a year.

Heavyweight Dangote Cement and MTN  each fell the maximum 10 per cent allowed on the bourse, to help drag the index to 102,395.21 points.

The currency dropped to N1,712 per dollar in late trades on the official market and to around the same level on the unofficial market after extending losses.

Africa's largest economy has been experiencing crippling dollar shortages that have pushed its currency to record lows, though central bank Governor Olayemi Cardoso has said that foreign exchange liquidity is improving.

The latest fall on the currency and stock markets comes after data showed on Thursday that the country's inflation rate had accelerated further in January, reaching almost 30 per cent in annual terms, driven by soaring food costs.

"Without policy moves in sight to rein in inflation, the naira will continue to devalue simply on a purchasing power basis. There are also risks that it could further deter foreign investors, given the increasingly negative real yield found in Nigerian debt securities," said Kyle Chapman, foreign exchange markets analyst at London-based Ballinger & Co.

Stocks on Nigeria's All-Share Index fell 3.15 per cent on Monday after banking, consumer goods and industrial shares dropped, to post their single biggest fall since Oct. 2022.

Stocks had been acting as a hedge against inflation for investors.

Cardoso has hiked open market rates to draw investors to bills which had lost their shine to equities as inflation climbed, but treasury rates still lag the benchmark policy rate and the fall in the naira means yields would have to rise further.