Foreign investors flee Nigeria
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