Nigeria stocks, bonds suffer as funds exit naira assets on oil price risk
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Nigerian stocks hit a seven-month closing low on Thursday while the 10-year government bond yield hit a 10-month high as investors unnerved by falling oil prices sold off frontier assets.
The sharp falls in the bond and stock markets on Thursday pushed the naira currency to 165.30 to the dollar, its weakest in at least eight months, as investors rushed to repatriate money to safe havens, dealers said.
“The selloff accelerated in the Nigerian … market as Brent crude oil price touched an $82.60/barrel low intraday. Our outlook … remains negative as we see no immediate catalyst to override the general bearish bias,” Vetiva capital said.
Brent crude oil, which Nigeria produces, has lost more than 28 percent since June, hurting the country’s finances. Losses have accelerated in October on signs the Organization of the Petroleum Exporting Countries has no plan to cut output.
The 10-year government bond yield rose to 13.10 percent, up 33 basis points on the day, a level last seen in December 2013, while the main all share index closed at 38,490 points, down 2 percent.
Analysts said most foreign investors are moving cash away from frontier assets to safety as interest rates in the U.S. look ready to begin normalising.
In the stock market, heavyweight Dangote Cement, Nigeria’s biggest listed company, shed 2.25 percent to 214 naira. Lafarge Africa, the local unit of French cement maker Lafarge, fell 5 percent to 116.85 naira, pulling the bourse lower.
Stockbrokers told Reuters that domestic investors that got their fingers burnt during the 2008 stock market collapse were sticking to the sidelines owing to the market volatility.
Nigeria’s stock market has been dominated by foreign investors, who make up more than half of trades, since after the 2008 collapse, which wiped off more than 60 percent of stock values, leaving the bourse vulnerable to capital flight.
Article Credit: Businessdayonline