The postponement of Nigeria’s general election has hit the country’s faltering economy, adding to existing pressures caused by the global fall in oil prices, analysts said.
The six-week suspension was granted to give the military more time to secure and stabilise the northeast, which has been under assault by Boko Haram Islamists since 2009.
But doubts about whether that goal can be achieved, fears that a further delay may be necessary and suspense over who will actually win the March 28 vote has buffeted markets and left investors jittery.
“It (the delay) has sent a panicky signal to investors of an unsure tomorrow in our economy,” economist and author Vincent Nwanma told AFP.
On February 6 — the day before the postponement announcement — the Nigerian All-Share Index closed at 29,985, and had dropped 2,399 points or 8.0 percent one week later.
Top losers included blue chip firms such as National Salt Company Nigeria, a number of leading banks, Flour Mills Nigeria, the conglomerate UAC and Guinness Nigeria.
Bloomberg said in a February 9 report that the Nigerian stock market was the worst-performing in the world this year.
“The uncertainty occasioned by the six-week extension has taken its toll on the stock market,” said Gabriel Ilori Akinyemi, managing director of stockbroker firm Valmon Securities Ltd.
“People are selling their stocks at a loss,” Rotimi Fakayejo, the managing director of Enterprise Capital, told a local television station in Lagos.
Nwanma said the share losses were to be expected given the overwhelming negative sentiment.
“Buyers reduce their exposure in stocks and in the economy. The market is currently witnessing a lot of sell-off of their portfolio,” he said.
– Oil shocks, currency slide –
The sell-off could not have come at a worse time for Africa’s largest economy, which was already feeling the pinch from plunging global oil prices since mid-2014.
The continent’s top oil producer and most populous nation is dependent on crude sales for the majority of government revenues, even as it tries to diversify its economy.
But crude prices lost around 60 percent of their value to about $40 between June and late January owing to an oversupply in world markets and dwindling global demand. While prices have been climbing in recent weeks markets-watchers say volatility is likely to continue for some time.
The shortfall between market prices that have recently hovered at around $50 per barrel and the Nigerian government’s own benchmark of $65 per barrel has forced a revision of budget estimates for 2015, and an urgent hunt for savings.
Finance minister Ngozi Okonjo-Iweala told the Financial Times in an interview published on Thursday that the government would consider further spending cuts.
Oil shocks have sent the Nigerian naira into free fall, with the currency losing 15 percent of its value against the dollar in the past three months, touching record lows, Bloomberg said.
Greater volatility has repeatedly led to shutdowns of Nigeria’s forex market, while the Central Bank of Nigeria has spent about $1 billion shoring up the plummeting currency, according to the FT.
That slide in value, which has had a knock-on effect for consumers in the form of higher prices, has added to concerns about inflation, which was running at 8.0 percent in December.
It has also triggered greater demand for forex, particularly of dollars.
“This clearly indicates uncertainty and fear,” analyst Ralph Balogun said.
Ratings agency Standard and Poor’s said on February 10 that a combination of falling oil prices and political risk “may test Nigeria’s institutions or fiscal and external resilience.”
Contributing to the standstill is the difficulty in predicting who will actually win the election.
President Goodluck Jonathan has been seen as neck-and-neck with the main opposition candidate Muhammadu Buhari, a former military ruler.
“The waiting game continues. The uncertainty in the economy will continue til election results are out and political tension is doused,” said Balogun.