For­eign in­vestors flee Nige­ria

The Star Early Edition - - BUSINESS REPORT - Paul Richard­son Nairobi

FOR­EIGN in­vestors flee­ing Nige­ria as oil prices plunge were leav­ing stocks un­der­val­ued in Africa’s big­gest econ­omy, the bourse’s chief ex­ec­u­tive said.

The bench­mark in­dex’s 18 per­cent de­cline so far this year was not jus­ti­fied by eco­nomic changes and Nige­rian eq­ui­ties were “ef­fec­tively on sale”, Os­car Onyema said on Mon­day. “The fun­da­men­tals de­mand higher val­u­a­tions.”

Nige­rian stocks have dropped as crude slid into a bear mar­ket and the cen­tral bank eroded re­serves to support the cur­rency, which fell to a record low this month. Nige­ria is Africa’s big­gest oil pro­ducer, and its $520 bil­lion (R5.7 tril­lion) econ­omy is fore­cast to grow 6.5 per­cent this year and the next, ac­cord­ing to a Bloomberg survey of econ­o­mists.

For­eign­ers would prob­a­bly re­main wary of the Nige­rian mar­ket un­til pres­i­den­tial elec­tions in Fe­bru­ary, Onyema said, adding that in­vestors would not com­mit funds un­til they had clar­ity on pol­icy and se­cu­rity un­der the new ad­min­is­tra­tion.

An Is­lamist in­sur­gency in north­ern Nige­ria and a po­lar­is­ing cam­paign for the pres­i­dency pit­ting can­di­dates from the mainly Mus­lim north against an in­cum­bent from the largely Christian south pointed to “a very per­ilous contest whose re­sults may also be dis­puted”, the Brussels-based In­ter­na­tional Cri­sis Group said last week.

Onyema said: “We’re in a po­lit­i­cal cy­cle right now and for­eign in­vestors… want to get cer­tainty about the se­cu­rity sit­u­a­tion and they also want to see the pack­age of mea­sures that the fis­cal and mon­e­tary au­thor­i­ties will take in ad­dress­ing the shocks that we’ve seen.”

The naira has weak­ened to a record low of 177.40 per dol­lar this month be­cause of the col­lapse in the price of oil, which ac­counts for more than twothirds of gov­ern­ment rev­enue.

“When you look at Opec coun­tries, they’re all feel­ing the sweat, but Nige­ria tends to be more pro­nounced, be­cause of the per­ceived weak­nesses in our buf­fers such as the level of for­eign re­serves and the abil­ity of the cen­tral bank to de­fend the cur­rency,” Onyema said.

The cen­tral bank was due to meet yes­ter­day to set in­ter­est rates. – Bloomberg

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