Lower oil price weighs on naira

NIGERIAN stocks fell for a second day, erasing gains made so far this year, as a lower oil price added to speculation the country’s currency may be devalued.

The Nigerian Stock Exchange (NSE) all share index declined the most since February 12 yesterday, with more than six stocks falling for each one that gained. Prices for Brent crude, down almost 50 percent since June, retreated for the first time in three days to $58.09 (R687) a barrel, while the naira headed for the lowest since March 13.

“A lot of investors, especially foreign investors, are watching because they believe the naira is going to have to devalue further,” Kayode Akindele, a partner at TIA Capital Management, said. “They believe the oil price is going closer to $45 and it might put renewed pressure on the naira.”

Nigerian stocks rallied 15 percent in the four days tion among his backers as a ruler who cracked down on corruption and crime after seizing power in a 1983 coup, does not have big shoes to fill.

Stocks have underperformed after the March 28-29 vote.

The International Monetary Fund estimates economic growth will slow this year to 4.8 percent from 6.1 percent last year. The NSE’s all share index declined 2.3 percent to 34 144.97 points by 1.46pm in Lagos, the commercial capital.

The gauge’s 14-day relativestrength index, which rose to the highest since February 2013 on April 2, decreased to below 70 for the first time in four days. A level above 70 typically indicates to technical analysts an asset’s move is overdone.

Oando, which operates a network of fuel stations and explores for crude, led declines, losing 9.7 percent to 15.78 naira (R0.93). FCMB Group, a financial services company, fell 6.8 percent to 3.01 naira.

Falling oil prices have weighed on the local currency, with the naira down 17 percent against the dollar in the past six months. – Bloomberg almost all equity markets in Africa since Jonathan took office in May 2010, the currency in February plummeted to a record low and dollar investors were set to lose more money in naira debt last quarter than anywhere else on the continent.

A retired major general who lost three previous elections, Buhari pledged on the campaign trail to clamp down on corruption, boost average annual growth to 10 percent and create at least 1 million jobs a year. Buhari won 52.4 percent of votes cast in all 36 states and the Federal Capital Territory in Africa’s biggest oil producer, according to tallies by the electoral authorities. Jonathan received 43.7 percent in the March 28-29 election.

The new government also faces the task of ending a sixyear-old war against the Islamist militant group Boko Haram that has killed more than 13 000 people and restoring investor confidence in an economy that is reeling from a more than 50 percent drop in the price of oil, its main export, since June. Buhari will also need to sway detractors who say his government was remembered for human rights abuses, with hundreds of politicians, businessmen and journalists jailed.

“The way the markets will react will depend on how the loser behaves,” Ayodele Salami, who oversees about $200 million (R2.4 billion) of Nigerian equities as the chief investment officer of London-based Duet Asset Management, said. “If we were to see incidences of civil unrest then you might see another sell-off.”

Yields on the country’s $500m of dollar bonds due July 2023 fell 19 basis points to 6.02 percent by 9.56am in London yesterday, the lowest level since December 8.

With oil providing twothirds of government revenue and 90 percent of foreign income, the commodity’s decline threatens the economy, with the International Monetary Fund forecasting growth will slow to 4.8 percent this year, about half the average of the past 15 years. The naira has dropped 18 percent against the dollar over the past six months, the steepest decline among 24 African currencies tracked by Bloomberg.

Not everyone would be overwhelmed by Buhari’s win, because his economic policies were unclear, David Adonri, the chief executive of Lagosbased Lambeth Trust and Investment, said from Lagos.

Investors wanted a “marketdriven” economy, he said. “It is not clear how Buhari is going to promote that.“– Bloomberg