The Nigerian Stock Exchange opened the month of August negatively as the All Share Index fell 1.09 percent Wednesday, marking the biggest single day decline in equity prices in over a month. The index tumbled by more than 400 points as investors sold off stocks in 3 of the 4 largest companies on the exchange.
Abdulrauf Bello, investment research analyst at WSTC Financial Services said, “The bearish performance of the market is not affected by investors’ earnings but by macro-economic issues which does not necessarily affect the companies. They include, political tensions and capital outflow although, political tensions is the major factor that affects the market.”
On the reason why investors are selling off, Bello said “it is because of political tension as investors do not like to be locked-in to equities in a period close to election as they are unsure of who will win the election.”
“If the incumbent government remains in power in 2019, it might be a good thing for stability. Investors fear that if the incumbent government does not win, there could be a change in policy or even an eruption of violence in the country which could darken the economic outlook,” Bello added.
Nigerian leader Muhammadu Buhari lost a key supporter yesterday in his northern stronghold, a day after the senate president walked out of the ruling party amid a wave of defections to a swelling opposition movement ahead of elections in February.
The governor of north-western Sokoto state, Aminu Tambuwal, left the All Progressives Congress to join the People’s Democratic Party, which ruled Nigeria for 16 years until Buhari’s 2015 win. Dangote Cement, which accounts for 30 percent of the total equity capitalization fell 1.28 percent on Wednesday. Other bellwethers such as Nestle and Nigerian Breweries were also down 2.5 percent and 1.9 percent respectively.
The three blue-chip companies who boast a market capitalization of around N6 Trillion as at yesterday lost a total of N98.9 billion in a single day, sending the NSE index to its biggest one day loss in the last six weeks.
The worst performer yesterday include CAP (-10%), Royal Exchange (10%) and International Breweries (9.73%). In total, about N126 billion was lost in the market on Wednesday with the three market giants contributing almost 80 percent of the total market loss.
“The selloffs is not an indication that the shares are bad rather just investors trying to cash out for different reasons; selling at a higher price than when they bought the shares, moving to safer markets and securities or just selling and keeping it awaiting when they feel the price is low again for them to enter, as these companies stocks still have sound fundamentals”, said Dolapo Ashiru, a Lagos based investment analyst.