Nigerian Stocks: Selloff to Persist as Investors Weigh Options

By Modupe Gbadeyanka

Last week, the Nigerian Stock Exchange (NSE) suffered a week-on-week (w-o-w) loss of 2.89 percent as political tension in the country put selling pressure on the market.

Throughout the week, the equity market was in red with the heaviest decline recorded on Friday, the last trading day of week, when the benchmark index depreciated by 2.17 percent, leaving the Year-to-Date (YtD) loss to 7.31 percent.

It was observed that portfolio investors, mostly foreign, embarked on profit-taking last week as most of them don’t want to be caught in the political web in the country.

Also, some of the foreign portfolio investors are now considering the favourable rates in the United States, thereby seeing investment in the emerging markets as too risky.

But stock market experts say this selling pressure being experience in the local bourse will continue this week as there are no possibly new developments to push investors to buy and remain in the market.

According to those at Cowry Asset, this would be mainly influenced by political risks in the country.

The National Assembly, which has been divided over the defection of the Senate President, Mr Bukola Saraki, from the ruling All Progressives Congress (APC) to the opposition Peoples Democratic Party (PDP), will likely reconvene tomorrow to consider the INEC budget for the 2019 general elections.

While the executive and some lawmakers of the APC want Mr Saraki to resign as Senate President, the PDP and other Senators want him to stay.

Last Tuesday, operatives of the DSS invaded the parliament, preventing lawmakers of the PDP from gaining access to the chamber. This move was seen as part of efforts to illegally remove the Senate President.

With this in focus, analysts at Cowry Asset said, “This week, we expect the local bourse to close in red territory as political risk continues to weigh on the market.”

For analysts at Business Post, they believe equity investors will trade cautiously this week as they continue to monitor happenings in the country and weigh their options.

According to Business Post analysts, some of the options are the planned release of the inflation rate for July 2018 this Wednesday by the National Bureau of Statistics (NBS) and the release of the Gross Domestic Product (GDP) figure for the second quarter of 2018 next Monday.

These may likely lift the market, resulting in mixed trading during the week. However, the bears may prevail on the bulls at the end of the week, leaving the market slightly in the danger zone.