Nigerian stocks hit a 3-year low on Monday as investors complained the government has yet to start tackling the problems of Africa’s biggest economy, nearly three weeks after ministers were sworn in.
The stock market, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, shed 0.84 percent on Monday on thin volumes to close at 27,385, a level last seen in December 2012. The index is down 20.3 percent year-to-date.
Nigerian shares lost 6.5 percent in October as foreign investors, the most active traders, stayed on the sidelines. It posted a further 6.1 percent decline in November.
Market capitalisation has been drifting lower as investors wait for government plans and as the poor outlook for Africa’s top oil producer drags down the relatively liquid banking and consumer goods sectors.
All the sectors on the stock market have fallen sharply this year with the consumer goods index down 22.4 percent and the index of the top 10 banks shedding 19.9 percent.
“The role foreign investors play in the Nigerian equity market cannot be ignored … hence the need for the central bank and government to review their stance on forex policies,” said Ayodeji Ebo, head of research at Afrinvest.
President Muhammadu Buhari swore in his cabinet on Nov. 11, five months after he took office, but work may not get under way until early next year as the country comes to a halt for a Christmas break in mid-December, analysts said.
The central bank announced a surprise interest rate cut last week to lift the economy. But the bourse rose for only one day as investors looked for fiscal policy signals.
“We maintain a long term view in the market as we expect the bearish trend to persist unless a deliberate policy is announced to turn the tide,” Ebo said.
Several companies, especially consumer goods firms, have posted weak profits, attributing the results to the effects of currency controls which have raised costs. Bank stocks have sold off because of the heavier regulatory burden.
Investors had hoped for a sustained rally after smooth elections in March. But they are now alarmed about the continued slide in the naira and the impact of persistently low oil prices on government finances.
Monday’s top decliners included PZ Cussons down 6.16 percent while Cement Company of Northern Nigeria (CCNN) and Forte Oil both shed 5.0 percent. Unity Bank fell 4.9 percent.