Nigeria stock market deals fell 22 pct last month amid naira crisis

LAGOS (Capital Markets in Africa) – The value of trading on Nigeria’s stock market dropped by 22.3 percent to 74.1 billion naira ($236 mln) in February from a month before, the stock exchange said on Tuesday, as foreign investors kept to the sidelines.

Nigeria is battling a currency crisis brought on by low prices for oil, its main export, and now operates multiple currency regimes dominated by central bank intervention, making it difficult to price assets.

It has several exchange rates — the official one, the black market, a rate for Muslim pilgrims going to Saudi Arabia and a retail rate set by exchange bureaus.

On Monday, the central bank set a new naira rate for consumers with certain foreign expenses and stepped up dollar sales. But analysts doubted whether the moves would draw foreign investors back to Africa’s largest economy.

The stock market was one of the world’s best performing frontier markets until 2013 but low liquidity levels and currency restrictions have deterred foreign investors.

Foreign transactions on the stock exchange hit 1.54 trillion naira ($4.9 bln) in 2014, when oil prices were at a peak, but declined to 518 billion naira last year as crude prices plunged, the stock exchange said.

Analysts expect more pain.

If index provider MSCI fulfils a threat to drop Nigeria from its frontier equity benchmark when it reviews its indices in May, foreign trades could fall further.

Nigerian shares have lost 5.2 percent so far this year after a 6.2 percent fall last year. In dollar terms, they shed 40 percent in 2016 as the naira fell by a third on the official market due to central bank reforms.

The stock exchange said foreign investors traded shares valued at 74.1 billion naira last month, down from 95.3 billion naira in January, with sales accounting for more than half those transactions.