September 6, 2018

Political Tension : Nigerian stock market now ranked worst performing in Africa

Nigerian Stock Exchange SEC)

Nigerian Stock Exchange NSE

By Nkiruka Nnorom

The series of tensed political developments in Nigeria coupled with some negative macroeconomic statistics have taken a huge toll on the competitiveness of Nigeria’s stock market, crashing the ranking of the Nigerian Stock Exchange, NSE, to worst performing in Africa 2018Year-to-Date,YtD.

NSE was ranked best performing in Africa in 2017. It was also ranked the third best in the world last year by ‘CNN Money’  after recording a whopping 48 percent returns on investments during the year.

Nigerian Stock Exchange

Nigerian Stock Exchange NSE

However, Vanguard checks revealed that as at Tuesday, September 3, 2018, the NSE All Share Index, ASI, had fallen by -11.3 percent YtD.

The weekly pan-African stock market monitor by United Capital Plc, a Lagos based investment house, which built the statistics indicated that BVRM (“Regional Securities Exchange) was the second worst performing stock market in Africa with a negative return of -11.1 percent YtD. BVRM covers Francophone West Africa’s weaker economies including Benin Republic, Burkina Faso, Guinea Bissau, Cote d’Ivoire, Mali, Niger, Senegal and Togo.

The analysts listed Morocco Stock Exchange as the third performing with -7.1 percent negative return.

South Africa, competing for leadership position amongst African economies by size, also had its bourse, the Johannesburg Stock Exchange, JSE, going down, but was better of with a -1.3 percent negative return.

On the flip side, the Tunis Stock Exchange, TSE, topped other major exchanges, rising by 33.4 percent during the eight month period, followed by Zimbabwe Stock Exchange, ZSE, and Ghana Stock Exchange, GSE, which rose by 21.8 percent and 7.9 percent respectively.

Explaining the lacklustre performance of the NSE, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management, a Lagos-based investment banking firm, said that the  major constrictive factor that led to weak performance of the Nigeria equities market is the present political situation, adding that none of the countries that outperformed the NSE is going through a national election fever. “The earlier part of this year witnessed a lot rumbling in the ruling party, which scared foreign investors away from the market. So, 2018 is completely different from 2017 because 2018 is almost an election year because it precedes a national election with a lot attention now focused on political activities, leading to heightened political risk, which investors are shying away from. That is why also the equities market has not done well in 2018.

“So, it has to do with political risk in addition to some economic factors such as the normalisation of interest rate in the United States of America, increase in yield in the United Kingdom and even the normalisation of monetary policy by the European central bank and Japanese central bank,” he said.