*Naira falls amid pressure

Nigeria’s financial markets were on a tailspin at the weekend amid concerns over macroeconomic outlook and dodgy currency risks.

 Investors panicked as sustained price depreciation at the stock market built up net loss of N601 billion in four days. The naira fell across the official and parallel markets as pressure continued to mount on the national currency on the back of huge unmet foreign exchange (forex) demand.

At the official Investors and Exporters (I & E) Window, naira depreciated by 16 basis points to N464.00 per dollar while it fell by 13 basis points to N743.00 per dollar at the parallel market.

The three-digit gap between the official and parallel markets has sustained pressure on the national currency, with most analysts expecting the forex liquidity crisis to remain in the meantime in the absence of any major policy changes.

Nigeria’s forex reserves cut a 12-week consecutive decline at the weekend with a modest increase of $38.89 million to close at $35.43 billion.

Benchmark indices at the Nigerian stock market indicated average decline of 2.08 per cent, equivalent to net capital depreciation of N601 billion within four days of trading.

The steep decline depressed Nigerian equities’ average year-to-date return to 1.25 per cent, a far cry from recent high of about 10 per cent. Weekend’s bearish closing further highlighted the negative trend that had seen Nigerian equities dropping by 4.31 per cent in the past two weeks.

The performance of Nigerian equities bucked global optimism as investors showed stronger appetite for advanced and emerging markets. United States’ benchmark indices- Dow Jones Industrial Average (DJIA) and S & P 500 Index rose by 1.6 per cent and 1.0 per cent respectively. United Kingdom’s FTSE 100 Index appreciated by 1.7 per cent. Japan’s Nikkei 225 Index rose by 3.5 per cent while China’s SSE inched up by 0.3 per cent.

Most analysts remained cautious about outlook for the Nigerian financial markets, citing macroeconomic uncertainties and absence of any immediate policy triggers for a sustained recovery.

Analysts at Afrinvest Securities, a major securities dealing firm, said they expected the bearish performance at the stock market “to linger on account of sustained weak investor sentiment”.

Analysts at Arthur Steven Asset Management said while recent price depreciation may fuel bargagin-hunting, investors must be wary of running profit-taking sentiment.

Cordros Capital, a leading investment banking group, said the country’s forex liquidity crisis may linger in the short-to-medium term, a market euphemism for some one or more years.

According to analysts, forex liquidity issues will remain as there are no positive signal that denotes an improvement in forex supply in the light of the country’s low forex inflows from domestic sources, such as crude oil production; and foreign portfolio investors.

 At the stock market, there were nearly no safe haven for investors with a market-wide selloff overshadowing dividend declarations by several active companies.

The All Share Index (ASI)- the value-based common index that tracks all share prices at the Nigerian Exchange (NGX), closed weekend at 51,893.94 points as against the week’s opening index of 52,994.13 points.

 Aggregate market value of all quoted equities at the NGX dropped from its week’s opening value of N28.869 trillion to close weekend at N28.268 trillion.

All sectoral indices closed negative at the weekend, with the exception of the NGX Consumer Goods Index, which posted a modest growth of 0.05 per cent. The NGX 30 Index, which tracks the 30 largest stocks at the market, dropped by 1.65 per cent. The NGX Banking Index, the most influential index, dipped by 1.40 per cent. The NGX Insurance Index, the most populous sector, declined by 1.76 per cent while the NGX Industrial Goods Index dipped by 0.40 per cent.

There were more than two losers for every gainer at the market. Pricing trend analysis showed 18 gainers against 39 losers last week, on the same trend with 16 gainers and 37 losers recorded in the previous week.